/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/081216.mbx T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, December 16, 2008, Vol. 12, No. 299 Headlines 155 EAST: Moody's Downgrades Corporate Family Rating to 'Ca' ADVANTA CORP: Moody's Downgrades Senior Unsecured Ratings to 'B1' AGRIPROCESSORS INC: Buyer Offers to Pay Off Secured Creditors AMERICAN INT'L: Sells $39.3BB RMBS Portfolio to Maiden Lane ARCHWAY COOKIES: U.S. Trustee, Creditors Balk at Bonus Program BEAZER HOMES: Fitch Affirms 'B-' Issuer Default Rating BERNARD L. MADOFF: Irving Picard Appointed as SIPA Liquidator BIOXEL PHARMA: Seeks Protection Under CCAA; Gets $450,000 Facility BLYTH INC: S&P Cuts Corp. Credit & Sr. Unsec. Debt Ratings to B+ BOLL WEEVIL: Files for Chapter 7 Liquidation, Shuts Down 6 Stores CADENCE INNOVATION: Withdraws Motion to Auction 3 Plants CENTEX CORP: Fitch Downgrades Issuer Default Rating to 'BB' CHARTER COMMUNICATIONS: Moody's Downgrades PDR Ratings to 'Ca' CHARTER COMMUNICATIONS: S&P Junks Corporate Credit Rating CHESAPEAKE ENERGY: S&P Affirms Corporate Credit Rating at 'BB' CHRYSLER LLC: Default Risk Hinges on Government Action, S&P Says CIRCUIT CITY: Seeks to Extend Lease Decision Period Until March 10 CIRCUIT CITY: Presents Panasonic Settlement Agreement CIRCUIT CITY: Committee Demands Information on 1st Day Orders CIRCUIT CITY: Seeks to Employ Mcguirewoods as Ch. 11 Co-Counsel CLAYTON WILLIAMS: S&P Keeps B Sr. Unsec. Rating; Outlook Stable CNL FUNDING: Moody's Downgrades Ratings on Seven Classes of Notes COLEMAN CABLE: Moody's Affirms Corporate Family Rating at 'B1' COMFORT CO: Files Joint Chapter 11 Plan and Disclosure Statement CORPORACION DURANGO: U.S. Court Cedes to Mexico Main Proceeding CULP INC: Receives Notice of Listing Non-Compliance from Nasdaq CYBERSURF CORP: Didn't File Annual Report, Gets Cease Trade Order DELTA FINANCIAL: Delaware Court Confirms Second Amended Plan DP FOODS: Files for Ch. 11 to Halt Burger King from Dropping Deals DR HORTON: Fitch Downgrades Issuer Default Rating to 'BB' EASTMAN KODAK: Moody's Reviews Low-B Ratings for Likely Downgrade ECLIPSE AVIATION: Committee Objects to Sale to Insider FEDERAL-MOGUL: Indian Government Okays $15MM Investment FIRST DATA: Posts $547MM Net Loss in Nine Months ended Sept. 30 FOREST OIL: S&P Keeps B+ Sr. Unsec. Rating; Outlook Stable GENERAL GROWTH: Bankruptcy Will Have Little Effect on CMBS Deals GENERAL MOTORS: Default Risk Hinges on Government Action, S&P Says GENERAL MOTORS: Lets GMAC Defer $1.5B Payment Until Dec. 30 GMAC LLC: Extends Notes Offerings to December 26 GMAC LLC: Gets Dec. 30 Extension of $1.5-Bil. Owed to GM GMAC LLC: Tries to Lure Potential Investors to Raise Capital GRAHAM ENTERTAINMENT: Voluntary Chapter 11 Case Summary GRANT FOREST: S&P Junks Corporate Credit Rating; Outlook Negative GREENBRIER COMPANIES: Moody's Affirms 'B1' Corporate Family Rating GREENSTONE RESOURCES: Creditors Accept Plan of Arrangement HANCOCK FABRICS: Posts $70.6 Million Net Sales for 3rd Qtr. 2008 HAWAIIAN TELCOM: Wants Chapter 11 Case Moved to Hawaii HEALTHSOUTH CORP: 3 Executives Acquire 34,900 Shares HEALTHSOUTH CORP: Executives Buy Shares of Stock, Disclose Stake HELIX ENERGY: Moody's Reviews 'B2' Ratings for Possible Downgrade HEXION SPECIALTY: Inks $1BB Huntsman Settlement; Merger Canceled HEXION SPECIALTY: Restates 1st and 2nd Quarter 2008 Financials HIDDEN SPLENDOR: Confirms Plan, Nears Emergence HINES HORTICULTURE: Bid Procedures Ok'd; Dec. 16 Sale Hearing Set HOVNANIAN ENTREPRISES: Fitch Affirms Issuer Default Rating at 'B-' HUNTSMAN CORP: Drops Merger, Gets $1B from Hexion & Apollo INDALEX HOLDING: S&P Cuts Rating on Senior Secured Notes to 'CCC-' JOSEPH MALONE: Voluntary Chapter 11 Case Summary KB HOME: Fitch Downgrades Issuer Default Rating to 'BB-' KB TOYS: Gets Court's Approval to Pay 10,900 Employees KB TOYS: Returns to Bankruptcy Due to Rapid Decline in Sales KEY PLASTICS: Financial Woes Cue Chapter 11; Files Prepack Plan KEY PLASTICS: Case Summary & 30 Largest Unsecured Creditors KRISPY KREME: Posts $5.9MM Net Loss in Quarter Ended November 2 LANDAMERICA FINANCIAL: Amends Stock Buy Agreement W/ Fidelity LANDSBANKI ISLAND: Luxembourg Bank Unit to Be Liquidated LEAR CORPORATION: Moody's Lowers Corporate Family Rating to 'B3' LEHMAN BROTHERS: Fitch Withdraws D Long-Term Issuer Default Rating LEHMAN BROTHERS: Jarden Wants to Oust Lehman Unit as Loan Agent LENNAR CORPORATION: Fitch Lowers Issuer Default Rating to 'BB+' LEVEL 3 COMMUNICATIONS: CEO J. Storey Gets President and COO Posts LEVEL 3 COMMUNICATIONS: President and Fairfax Fin. Disclose Stake LEVEL 3 COMMUNICATIONS: Directors Sell, Purchase Shares of Stock LINEAR TECHNOLOGY: Capital World Discloses 11% Equity Stake LINEAR TECHNOLOGY: Board OKs Amendment of Robert Swanson Deal M/I HOMES: Fitch Downgrades Issuer Default Rating to 'B' MANCHESTER INC: Pre-Emergence Stock Cancelled; Now Privately Owned MARVEL ENTERTAINMENT: Settlement Agreement with Perelman Approved MAXTOR CORP: S&P Cuts Senior Unsecured Rating to 'B' MERITAGE HOMES: Fitch Affirms Issuer Default Ratings at 'B+' MERVYN'S LLC: Proposes Feb. 18 as Administrative Claims Bar Date MERVYN'S LLC: Seeks to Hire Streambank as IP Consultant MERVYN'S LCC: Former Employees Sue to Recover ERISA Benefits MERYVN'S LLC: New Retailers Acquire 22 Macerich-Owned Sites MESA ROYALTY: NYSE Extends Trustee's 10-K Filing until April 15 MGM MIRAGE: Will Sell Treasure Island Hotel to Ruffin for $775MM MERRILL LYNCH: S&P Junks Ratings on 6 Classes From 12 RMBS MERRITT FUNDING: Moody's May Further Cut Junk Ratings on 6 Notes MIAMI BEACH: S&P Changes Rating to 'BB' on $268.4 Mil. Bonds MORGAN STANLEY: Fitch Lowers Ratings on $7.523 Mil. Notes to 'B+' MORGAN STANLEY: S&P Downgrades Rating on $3 Mil. Notes to 'B-' MOTOR COACH: Creditors Committee Opposes Disclosure Statement NATIONAL CONSUMER: Fitch Downgrades Individual Rating to 'B/C' NORTEL NETWORKS: To Cure NYSE Average Closing Price Non-Compliance NUVEEN INVESTMENTS: Moody's Lowers Corporate Family Rating to 'B2' PENN TRAFFIC: Incurs Nine Month Loss of $21.4 Million PERRY REALTY: Case Summary & 13 Largest Unsecured Creditors PILGRIM'S PRIDE: Incurs $1.06B Operating Loss for FY2008 PILGRIM'S PRIDE: Seeks to Pay Amounts Owed to Employees PLCP LP: Files for Chapter 11 After Ethanol Production Halt PLY GEM: S&P Cuts Corporate Credit Rating to 'B-'; Outlook Neg. POWDER RIVER: Case Summary & 20 Largest Unsecured Creditors PRIMEDIA INC: S&P Downgrades Rating on $350 Mil. Facility to 'BB-' PRIMUS GUARANTY: S&P Junks Long-Term Counterparty Credit Rating PROGENICS PHARMACEUTICALS: To Cure Nasdaq Listing Non-Compliance PULTE HOMES: Fitch Downgrades Issuer Default Rating to 'BB+' QUANTUM CORPORATION: Moody's Reviews 'B3' Ratings for Likely Cuts QUESTEX MEDIA: Shortfall in Revenue Cues Moody's Junk Ratings QSOUND LABS: Has Until Dec. 23 to Submit Nasdaq Compliance Plan RACE POINT: Fitch Downgrades Ratings on Seven Classes of Notes RACE POINT: Fitch Affirms Ratings on Eight Classes of Notes RELIANT ENERGY: Breakup Fee Appeal Survives Sale of Property RESIDENTIAL CAPITAL: Fitch Takes Servicer Rating Actions RESIDENTIAL CAPITAL: GMAC Extends Offerings Until December 26 RESIX FINANCE: Moody's Downgrades Ratings on 71 Tranches RYLAND GROUP: Fitch Downgrades Issuer Default Rating to 'BB' SALLY HOLDINGS: S&P Raises Corporate Credit Rating to B+ From B SEAGATE TECH: S&P Cuts Senior Unsecured Rating to 'BB-' SECURUS TECHNOLOGIES: S&P Affirms 'B-' Issue-Level Rating SIMMONS BEDDING: Lenders Extend Forbearance Period to March 2009 SLANE 840: Auction Sale of Pledged Collateral Set for Jan. 7 SPECIAL DEVICES: Fails to Refinance Debt, Files for Chapter 11 SPANSION INC: Fitch Sees Likely Default, Junks Ratings on $1B Debt SPECIAL DEVICES: Case Summary & 30 Largest Unsecured Creditors STANDARD PACIFIC: Fitch Affirms Issuer Default Rating at 'B-' STANDARD STEEL: Moody's Affirms 'B2' Corporate Family Rating SUPER SAVE: Voluntary Chapter 15 Case Summary SYNCORA HOLDINGS: NYSE Suspends Common Stock Trading on Dec. 17 TENSYR LTD: Moody's Downgrades Ratings on Two Note Classes to Ca TPG-AUSTIN: Fearful Lehman's Inaction Will Cue Own Ch. 11 Filing TRIBUNE CO: Wants to Enjoin Utilities From Ceasing Services VENOCO INC: S&P Keeps B Subordinate Debt Rating; Outlook Stable VESTA INSURANCE: Files Post-Confirmation Status Reports VESTA INSURANCE: Trustee Seeks to Close Gaines' Chapter 11 Case VILLAGE HOMES: Has Authority to Use Cash & Sell Homes WELLMAN INC: Parties Object to Confirmation of Restructuring Plan WHITING PETROLEUM: S&P Keeps BB- Sub. Debt Rating; Outlook Stable YM BIOSCIENCES: Auditor Raises Going Concern Doubt ZOO HF: Fitch Retains Junk Ratings on EUR12.5 Mil. Class D Notes * Fitch Says U.S. CMBS Loan Extensions Won't Trigger Rating Cuts * Moody's Sees Bankruptcy Risk Among Derivative Product Companies * S&P Puts Junk Ratings on 8 Tranches From Seven CDO Deals * Large Companies with Insolvent Balance Sheets ********* 155 EAST: Moody's Downgrades Corporate Family Rating to 'Ca' ------------------------------------------------------------ Moody's Investors Service downgraded 155 East Tropicana LLC's corporate family rating and probability of default rating as well as the rating on the $130 million 8.75% senior secured notes due 2012 to Ca from Caa3. It also affirmed the SGL-4 speculative grade liquidity rating. The outlook is negative. In Moody's opinion, the deterioration of the economic conditions in Las Vegas and the company's weakening liquidity profile make a default likely in the next twelve months. The default, as per Moody's definition, could occur through the materialization of a distressed exchange offer, a missed interest payment or bankruptcy filing. 155 East Tropicana's revenues and EBITDA materially deteriorated in the third quarter of 2008. With $6.9 million of cash and cash equivalent, including approximately $3.8 million of cage cash as of September 30, 2008, and $5.1 million of revolver availability immediately after the October 1, 2008 interest payment, Moody's believes that the company may not be able to meet its 2009 bond interest obligations of approximately $11.4 million. The very depressed economic environment that has affected Las Vegas casinos is expected to continue into 2009 and it appears unlikely that the company will generate sufficient cash flow to avoid a default in the next twelve months. Ratings downgraded to Ca from Caa3: - Corporate Family Rating - Probability of Default Rating - Rating of Senior Secured Notes due 2012 (LGD assessment revised to LGD4/56% from LGD4/57%) The last rating action was on April 24, 2008 when Moody's lowered 155 East Tropicana LLC's corporate family rating to Caa3. 155 East Tropicana, LLC owns the Hooters Casino Hotel in Las Vegas, Nevada. The property is located one-half block from the intersection of Tropicana Avenue and Las Vegas Boulevard, a major intersection on the Las Vegas Strip. The Hooters Casino Hotel features a casino floor with 633 slot and video poker machines, 30 table games and 696 hotel rooms. The company generated approximately $61 million in net revenues in the last twelve month period ended September 30, 2008. ADVANTA CORP: Moody's Downgrades Senior Unsecured Ratings to 'B1' ----------------------------------------------------------------- Moody's Investors Service downgraded the ratings of Advanta Corp., including its senior unsecured rating to B1 from Ba3, and assigned a negative outlook. The rating action reflects Moody's concerns regarding the sharp erosion in Advanta's asset quality trends, heightened pressures on its funding and liquidity, and the adverse effects of these factors on the firm's core profitability as it navigates a highly challenging environment for credit card lenders. Advanta's delinquencies and loss rates have spiked sharply in the course of 2008. Moody's expects Advanta's asset quality performance to continue to deteriorate in 2009 -- and quite possibly into 2010 -- principally as the result of recessionary conditions in the U.S. and the firm's concentrated exposures to areas of the country experiencing the most severe economic downturn. Declining asset quality has given rise to increased loan loss provisioning, which has been the principal driver of a substantial decline in Advanta's profitability. Advanta posted a loss in Q3 2008 - even excluding non-recurring charges -- and Moody's anticipates that losses may continue throughout 2009, and potentially longer, as the company grapples with the effects of the recessionary environment on the credit quality of its small business card portfolio. Regarding liquidity and funding, the cost and availability of Advanta's access to securitization markets (which historically has comprised approximately 60% of managed funding) have been adversely affected by the intensification of the credit crunch. This has caused the company to shift its funding model almost entirely to deposit funding (including a substantial element of brokered deposits), a situation which Moody's expects will continue for the foreseeable future. Although Advanta has been able to fund efficiently through deposit channels to date -- amassing a significant liquidity portfolio -- the lack of access to the ABS markets and increased level of funding concentration in deposits -- where competition is intense - subjects the company to additional risk, in Moody's view. Advanta has responded to these developments by cutting back new loan originations and implementing a revamped customer segmentation strategy including significant price increases for certain customer groups. In Moody's view, this strategy -- while sensible in light of current economic and market conditions - involves significant execution risk, including potential franchise impairment and "adverse attrition" of customers. Moody's will actively monitor the progress of Advanta's retooled strategy, as well as the company's success in preserving its liquidity position at both its bank and holding company. In addition, a return to a stable outlook would be predicated on a stabilization of asset quality and sustained improvement in profitability from Advanta's core small business credit card segment. Ratings downgraded include these: Advanta Corporation -- -- Senior unsecured debt to B1 from Ba3 -- Senior unsecured shelf to (P)B1 from (P)Ba3 -- Subordinated debt to B3 from B2 -- Subordinated shelf to (P)B3 from (P)B2 -- Preferred Stock shelf to (P)Caa1 from (P)B3 The last rating action on Advanta was on September 22, 2008, when Moody's placed the ratings under review for possible downgrade. Advanta Corporation, headquartered in Spring House, PA, reported approximately $7.7 billion in managed assets as of September 30, 2008. AGRIPROCESSORS INC: Buyer Offers to Pay Off Secured Creditors ------------------------------------------------------------- McClatchy-Tribune reports that Quantum Capital Partners Inc. has offered a deal in the U.S. Bankruptcy Court for the Eastern District of New York to acquire Agriprocessors Inc. According to McClatchy-Tribune, the Quantum Capital filed to the Court a letter of intent stating that it would pay off Agriprocessors' secured creditors, including First Bank Business Capital, the lender that initiated foreclosure proceedings against Agriprocessors, in exchange for a major equity position in the debtor. The report says that the exact amount would depend on what is left over after creditors are paid. Quantum Capital also submitted to the Court a $28 million letter of credit for use in paying the obligation, the report states. McClatchy-Tribune relates that Quantum Capital said that it is prepared to inject $15 million into Agriprocessors to restart operations, after acquiring First Bank's legal claims. Quantum Capital, according to McClatchy-Tribune, asked for 10 days to perform due diligence, to be able to determine if the assets involved in the transaction are represented by the other party. McClatchy-Tribune reports that Quantum Capital's first request of keeping the Agriprocessors bankruptcy case in New York was denied by the Chief Judge Carla Craig of the U.S. Bankruptcy Court for the Eastern District of New York. According to the report, Judge Craig said that the case rightfully belongs in Iowa. McClatchy-Tribune states that Marxx Theresias, a principal in Quantum Capital, said that Agriprocessors' legal entanglements weren't intended, adding that an experienced management group interested in operating Agriprocessors approached Quantum Capital for the acquisition of the bankrupt company. About Agriprocessors Headquartered in Postville, Iowa, Agriprocessors Inc. -- http://www.agriprocessor.com/-- operates a kosher meat and poultry packing processors located at 220 North West Street. The company maintains an executive office with 50 employees at 5600 First Avenue in Brooklyn, New York. The company filed for Chapter 11 protection on Nov. 4, 2008 (Bankr. E. D. N.Y. Case No. 08- 47472). The case, according to McClatchy-Tribune, has been transferred to Iowa. Kevin J. Nash, Esq., at Finkel Goldstein Rosenbloom & Nash represents the company in its restructuring effort. The company listed assets of $100 million to $500 million and debts of $50 million to $100 million. AMERICAN INT'L: Sells $39.3BB RMBS Portfolio to Maiden Lane ----------------------------------------------------------- American International Group, Inc., reported that its U.S. life insurance companies (Life Insurance Companies) have sold to Maiden Lane II LLC (ML II) -- a newly formed Delaware LLC in which the Federal Reserve Bank of New York is the sole member -- their interests in a pool of $39.3 billion face amount of residential mortgage-backed securities (RMBS) held by their agent, AIG Securities Lending Corp., an AIG subsidiary, in connection with AIG's U.S. securities lending program. The agreement in principle between AIG and FRBNY for this transaction was announced on November 10, 2008. AIG Chairperson and CEO Edward M. Liddy said, "AIG's highest priority is the full repayment of the federal loan facility with interest. The creation and launch of this financing entity will eliminate the liquidity issues associated with AIG's U.S. securities lending program, which will facilitate our repayment plan. Although we have more work ahead of us, this is an important step forward. We appreciate the support of the Federal Reserve Bank of New York in implementing this transaction." FRBNY extended a senior loan to ML II to enable the purchase of the RMBS for an initial purchase price of $19.8 billion. The loan has a six-year term, subject to extension by FRBNY. It is secured by the $39.3 billion face amount of RMBS and bears interest at one-month LIBOR plus 1.0%. The purchase price may be increased as a result of the payment of the deferred contingent purchase price. The Life Insurance Companies applied the initial consideration from the sale of the RMBS, along with available cash and $5.1 billion provided by AIG in the form of capital contributions to the Life Insurance Companies to settle outstanding securities lending transactions under AIG's U.S. securities lending program. Included in the terminations were AIG's securities lending transactions with FRBNY under the securities lending agreement announced in October, which totaled approximately $20.5 billion at December 12, 2008. As a result of these transactions, AIG's October securities lending agreement with FRBNY and AIG's U.S. securities lending program have been terminated. To the extent there are sufficient net cash proceeds available to ML II from the RMBS after the senior loan from FRBNY is repaid in full, the Life Insurance Companies will be entitled to receive a portion of the deferred contingent purchase price from ML II of up to $1 billion plus interest at one-month LIBOR plus 3.0%. After this fixed amount of deferred contingent purchase price has been paid, the Life Insurance Companies will be entitled to receive one-sixth of any remaining net proceeds from the RMBS as additional deferred consideration for the sale of the RMBS. About American International Group Based in New York, American International Group, Inc. (AIG) is the leading international insurance organization with operation in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. During the third quarter of 2008, requirements to post collateral in connection with AIG Financial Products Corp.'s credit default swap portfolio and other AIGFP transactions and to fund returns of securities lending collateral placed stress on AIG's liquidity. AIG's stock price declined from $22.76 on Sept. 8, 2008, to $4.76 on Sept. 15, 2008. On that date, AIG's long-term debt ratings were downgraded by Standard & Poor's, a division of The McGraw- Hill Companies, Inc., Moody's Investors Service and Fitch Ratings, which triggered additional requirements for liquidity. These and other events severely limited AIG's access to debt and equity markets. On Sept. 22, 2008, AIG entered into an $85 billion revolving credit agreement with the Federal Reserve Bank of New York and, pursuant to the Fed Credit Agreement, AIG agreed to issue 100,000 shares of Series C Perpetual, Convertible, Participating Preferred Stock to a trust for the benefit of the United States Treasury. At Sept. 30, 2008, amounts owed under the facility created pursuant to the Fed Credit Agreement totaled $63 billion, including accrued fees and interest. Since Sept. 30, AIG has borrowed additional amounts under the Fed Facility and has announced plans to sell assets and businesses to repay amounts owed in connection with the Fed Credit Agreement. In addition, subsequent to Sept. 30, 2008, certain of AIG's domestic life insurance subsidiaries entered into an agreement with the NY Fed pursuant to which the NY Fed has borrowed, in return for cash collateral, investment grade fixed maturity securities from the insurance subsidiaries. On Nov. 10, 2008, the U.S. Treasury agreed to purchase, through its Troubled Asset Relief Program, $40 billion of newly issued AIG perpetual preferred shares and warrants to purchase a number of shares of common stock of AIG equal to 2% of the issued and outstanding shares as of the purchase date. All of the proceeds will be used to pay down a portion of the Federal Reserve Bank of New York credit facility. The perpetual preferred shares will carry a 10% coupon with cumulative dividends. AIG and the Fed also agreed to revise the existing FRBNY credit facility. The loan terms were extended from two to five years to give AIG time to complete its planned asset sales in an orderly manner. The equity interest that taxpayers will hold in AIG, coupled with the warrants, will total 79.9%. At Sept. 30, 2008, AIG had $1.022 trillion in total consolidated assets and $950.9 billion in total debts. Shareholders' equity was $71.18 billion, including the addition of $23 billion of consideration received for preferred stock not yet issued. ARCHWAY COOKIES: U.S. Trustee, Creditors Balk at Bonus Program -------------------------------------------------------------- The U.S. Trustee and the official committee of unsecured creditors formed in Archway Cookies LLC's bankruptcy case ask the Court to deny the Debtor's bonus program for 28 remaining employees. According to Bloomberg News, the U.S. Trustee and the Creditors Committee assert that the paying retention bonuses to executives are prohibited under the Bankruptcy Code. Archway has submitted a list of the 28 beneficiaries but did not identify whether any of those are executives of the Debtor. The U.S. Trustee has also objected to Archway's decision to seal the list from the public. As reported by the Dec. 8 edition of the Troubled Company reporter, the U.S. Bankruptcy Court for the District of Delaware has approved Lance, Inc.'s bid to purchase substantially all of the assets of Archway. Archer topped three other bidders at a December 2, 2008 auction. The Court declared Brynwood Partners VI L.P. as backup bidder in the event Archway fails to close the sale. Under the terms of the Asset Purchase Agreement, Lance will acquire substantially all of the assets of Archway Cookies for approximately $30 million. The transaction is expected to close no later than Dec. 15, 2008. Lance will use available liquidity under its current credit facilities to fund the acquisition. About Archway Cookies Headquartered in Battle Creek, Michigan, Archway Cookies, LLC, -- http://www.archwaycookies.com/-- makes soft-baked cookies. And crackers. In 1998, Specialty Foods Corp. acquired the Debtors' for about $100 million. Parmalat Finanziaria of Italy acquired Mother's Cake and Cookie Company and Archway Cookies from The Specialty Foods Acquisition Corporation for $250 million in 2000. Parmalat later sold its North American Bakery Group, which includes the Archway brands, Mother's brands and the U.S. and Canadian private label cookie businesses, to the private equity firm Catterton Partners and their operating partner Insight Holdings in 2005. Archway Cookies filed for Chapter 11 protection on Oct. 6, 2008 (Bankr. D. Del. Case No. 08-12323). Its affiliate, Mother's Cake & Cookie Co. also filed for bankruptcy (Bankr. D. Del. Case No. 08-12326). Michael R. Lastowski, Esq., at Duane Morris, LLP, represent the Debtors in their restructuring efforts. In their filing, the Debtors listed estimated assets of between $50 million and $100 million and estimated debts of between $500 million and $1 billion. BEAZER HOMES: Fitch Affirms 'B-' Issuer Default Rating ------------------------------------------------------ Fitch Ratings affirms Beazer Homes USA, Inc.'s Issuer Default Rating and outstanding debt ratings: -- Issuer Default Rating at 'B-'; -- Senior notes at 'CCC+/RR5'; -- Convertible senior notes at 'CCC+/RR5'; -- Junior subordinated debt at 'CCC-/RR6'. -- Secured revolving credit facility at 'BB-/RR1'. The Rating Outlook is Negative. The 'RR1' Recovery Rating on BZH's secured revolving credit facility indicates outstanding recovery prospects for holders of this debt issue. The 'RR5' on BZH's senior unsecured notes indicate below-average recovery prospects for holders of these debt issues. BZH's exposure to claims made pursuant to performance bonds and joint venture debt and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. The 'RR6' on BZH's junior subordinated notes indicate poor recovery prospects in a default scenario. Fitch applied a liquidation value analysis for these RRs. The ratings reflect the current very difficult housing environment and Fitch's expectations that housing activity will be even more challenging than previously anticipated throughout 2009. The recessionary economy, poor consumer confidence and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings also reflect negative trends in BZH's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios), erosion in tangible net worth from non-cash real estate charges and operating losses which have led to high debt leverage. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. Earlier in calendar 2008 BZH filed its financials for fiscal year 2007 and its 2008 first, second and third quarter 10Qs. BZH is now current on all of its required SEC filings. While BZH's audit committee has completed its independent investigation and the company has settled with the SEC, it is still under investigation by the U.S. Attorney's Office, which has the potential to result in regulatory fines. In August 2008, BZH completed the amendment to its revolving credit facility. As part of the amendment, the commitments under the revolving credit facility were reduced from $500 million to $400 million and the collateralization requirement was increased. The size of the secured revolving credit facility was recently reduced to $250 million as the company's consolidated tangible net worth fell below $350 million. The revolver is subject to further reduction to $100 million if the company's consolidated TNW falls below $250 million. At Sept. 30, 2008, BZH's consolidated TNW (for purposes of this covenant) was $314.4 million. As a result of the reduced credit facility, the collateral coverage requirement increased from 3.0 times to 4.5x the amount of outstanding loans and letters of credit. At Sept. 30, 2008, BZH had no outstandings under the revolver and $61.2 million of letters of credit outstanding. BZH had no availability under the revolver at the end of September. The company intends to add approximately $250 million of additional real estate assets to the borrowing base over the next 12 months, which would provide up to $35 million in additional borrowing base availability. BZH completed its fiscal 2008 (ended Sept. 30, 2008) with $584.3 million of cash on the balance sheet. Cash from operations during the 2008 fiscal year totaled $315.6 million, which included the receipt of $59.2 million of cash tax refund relating to a 2007 net operating loss carry back. BZH expects to receive an additional cash refund of approximately $150 million during the first half of its fiscal year 2009. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as trends in land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. BERNARD L. MADOFF: Irving Picard Appointed as SIPA Liquidator ------------------------------------------------------------- The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms, announced on Mon., Dec. 15, that it is liquidating Bernard L. Madoff Investment Securities LLC of New York, N.Y., under the Securities Investor Protection Act (SIPA). SIPC filed an application with the United States District Court for the Southern District of New York for a declaration that the customers of Bernard L. Madoff Investment Securities LLC are in need of the protections available under SIPA. The United States District Court for the Southern District of New York granted the application and appointed Irving H. Picard, Esq., as trustee for the liquidation of the brokerage firm, and further appointed the law firm of Baker & Hostetler LLP as counsel to Mr. Picard. SIPC President and CEO Stephen Harbeck said: "Upon information provided by the United States Securities and Exchange Commission and the Financial Industry Regulatory Authority, it is clear that the customers of the Madoff firm need the protections available under federal law. Mr. Picard has served as trustee in more brokerage firm liquidations than any other individual. SIPC and the trustee are dedicated to returning assets to customers as promptly as possible." Mr. Harbeck cautioned, however, that the scope of the misappropriation and the state of the defunct firm's records will make this more difficult than in most prior brokerage firm insolvencies. "It is unlikely that SIPC and the Trustee will be able to transfer the customer accounts of the firm to a solvent brokerage firm. The state of the firm's records may preclude a transfer of customer accounts. Also, because the size of the misappropriation has not yet been established, it is impossible to determine each customer's pro rata share of `customer property'." The trustee is charged with giving notice of the proceeding and mailing claim forms to the customers and other creditors of the firm. Information about the case also will be made available on the Web at http://www.sipc.org/ Mr. Picard stated that he is acutely aware of the concern of investors who have been caught up in this financial scandal. "I will work with SIPC to do what the law allows to ameliorate the losses to customers. About Bernard L. Madoff Bernard L. Madoff Investment Securities LLC is a leading international market maker. The firm has been providing quality executions for broker-dealers, banks, and financial institutions since its inception in 1960. During this time, Madoff has compiled an uninterrupted record of growth, which has enabled us to continually build our financial resources. With more than $700 million in firm capital, Madoff currently ranks among the top 1% of US Securities firms. As reported by the Troubled Company Reporter on Dec. 15, 2008, the Securities and Exchange Commission has charged Bernard L. Madoff and his investment firm, Bernard L. Madoff Investment Securities LLC, with securities fraud for a multi-billion dollar Ponzi scheme that he perpetrated on advisory clients of his firm. The estimated the losses from Madoff's fraud were at least $50 billion. BIOXEL PHARMA: Seeks Protection Under CCAA; Gets $450,000 Facility ------------------------------------------------------------------ Bioxel Pharma Inc. has filed a petition seeking protection under the Companies Creditors Arrangement Act. "We regret having to take this measure and we will work closely with our suppliers, employees and creditors in order to surmount this difficult period while waiting for orders and a recapitalization that will enable the Corporation to recover a liquidity position assuring the continuance of its business," said Olivier Meyer, president and chief executive officer of Bioxel. The company has also negotiated with Investissement Quebec a debtor-in-possession credit for up to $450,000 in order to have access to immediate liquidity while reorganizing its business. The company said the new financing would enable it to pay employees, suppliers and other business partners for goods and services received after the filing. The company said it plans to review all available alternatives, including finding a strategic partner to enhance the value of its intellectual property and other assets, completing a business combination with a strategic partner, and selling the business. Headquartered in Quebec, Canada, Bioxel Pharma Inc. (TSX Venture: BIP) -- http://www.bioxelpharma.com/-- makes and distributes taxane pharmaceutical ingredients including paclitaxel, docetaxel, 9-DHB and 10-DAB. BLYTH INC: S&P Cuts Corp. Credit & Sr. Unsec. Debt Ratings to B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its corporate credit and senior unsecured debt ratings on Greenwich, Connecticut-based Blyth Inc. to 'B+' from 'BB-'. At the same time, S&P withdrew the recovery and issue-level ratings on Blyth's $75 million unsecured revolving credit facility, which the company terminated on Dec. 5, 2008. The outlook is stable. As of Oct. 31, 2008, the company had about $147 million of total funded debt, excluding operating lease obligations. "The rating actions reflect the company's weak operating results in recent quarters that has affected credit measures and cash flow, and weaker liquidity associated with Blyth's recent termination of its unsecured revolving credit facility," said S&P's credit analyst Rick Joy. Significant input cost inflation and softer demand for highly discretionary and highly seasonal products (nearly 60% of sales take place in the second half of the year) have affected Blyth, and as a result, challenged operating performance. The U.S. remains a difficult market for PartyLite, and the company faces increasingly challenging conditions from a weak consumer spending environment and competitive threats in the direct-selling market. "However, the company's size and infrastructure provide it with some economies of scale and allow it to service a diverse customer base," he continued. The outlook is stable. Without the company's recently terminated $75 million revolving credit facility, S&P would expect it to maintain adequate cash on its balance sheet to fund its upcoming debt maturity and working capital needs. If operating performance weakens further and credit measures deteriorate, and/or if the company cannot maintain adequate liquidity, S&P could revise the outlook to negative. S&P estimates this could happen if EBITDA declined another 40% and expected debt reduction did not occur, which could cause leverage to approach the 4x area. Although unlikely over the near term, if the company can stabilize operating performance while maintaining a strong liquidity position, S&P could revise the outlook to positive. BOLL WEEVIL: Files for Chapter 7 Liquidation, Shuts Down 6 Stores ----------------------------------------------------------------- Penni Crabtree at SignOnSanDiego.com reports that Boll Weevil, Inc., has shut down six stores last week after filing for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Southern District of California. SignOnSanDiego.com says that the stores at these locations were closed: -- Shelter Island, -- Mira Mesa, -- Bonita, -- San Marcos, -- La Mesa, and -- Lakeside. Citing Boll Weevil restaurant manager Mindy Gretler, SignOnSanDiego.com relates that the store shutdowns have affected 60 to 70 workers, most are owed weeks of back wages. SignOnSanDiego.com states that four other Boll Weevil restaurants in Lemon Grove, Imperial Beach, Clairemont Mesa, and Ramona that are owned by independent franchisees aren't included in the bankruptcy filing. Boll Weevil filed for Chapter 11 protection in 1996, and reemerged in 1997 with about 17 restaurants and eight franchised units, SignOnSanDiego.com says. The California Labor Commission temporarily closed 12 of Boll Weevil restaurants in 2004 after investigators found out that 169 of the company's employees didn't have compensation insurance protection, according to SignOnSanDiego.com. The report says that after Boll Weevil granted the insurance to the workers, the stores were reopened and the firm was fined about $100,000. Boll Weevil, according to SignOnSanDiego.com, again filed for a Chapter 11 bankruptcy in July 2007. The company had six restaurants and four franchises at that time, the report states. SignOnSanDiego.com reports that Boll Weevil listed assets of about $1.1 million and debts of about $2.7 million. Boll Weevil, Inc., is a landmark San Diego restaurant chain founded by the late Fred Halleman. CADENCE INNOVATION: Withdraws Motion to Auction 3 Plants -------------------------------------------------------- Bill Rochelle of Bloomberg News reports that Cadence Innovation LLC has abandoned the idea of selling three Michigan plants at auction. Patrick J. Reilley, Esq., at Cole Schotz, Meisel, Forman & Leonard, P.A., in Wilmington, Delaware, informed the U.S. Bankruptcy Court for the District of Delaware that Cadence has not reached an agreement with General Motors Corp. and Chrysler LLC, its principal customers. Assuming an agreement is reached, the hearing will go as planned, he said. Cadence had said it would withdraw the sale motion if it couldn't reach agreements with GM and Chrysler. Cadence earlier filed a motion with the Court to sell three plants in Chesterfield, Hillsdale and Groesbeck, where Cadence performs the manufacturing of component parts supplied to General Motors Corporation and Chrysler LLC. The Chesterfield Plant has 1018 employees, the Groesbeck Plant has 198 employees, and the Hillsdale Plant has 190 employees. The Debtors' DIP Financing Agreement and Accommodation Agreements are conditioned on the Debtors' commitment to take actions necessary to sell all or substantially all of their businesses, pursuant to an agreed schedule which includes a October 31, 2008 deadline to execute a definitive asset purchase agreement, and to close the sale by December 15, 2008. The DIP Financing will expire no later than December 31, 2008. If a purchase offer acceptable to the Debtors is not received, the Debtors reserve the right to withdraw their Sale Motion without prejudice, and to pursue an orderly liquidation of the Plants to maximize the recoveries from those sales for the benefit of their estates and creditors. About Cadence Innovation Headquartered in Troy, Michigan, Cadence Innovation LLC -- http://www.cadenceinnovation.com/-- manufactures and sells auto parts to its customers GM and Chrysler. The company has at least 4,200 employees in the United States and Europe, including Hungary and Czech Republic. The company and its debtor-affiliate, New Venture Real Estate Holdings, LLC, filed for Chapter 11 reorganization on Aug. 26, 2008 (Bankr. D. Del. Lead Case No. 08- 11973). Norman L. Pernick, Esq. and Patrick J. Reilley, Esq., at Cole, Schotz, Meisel, Forman & Leonard, represent the Debtors as counsel. When the Debtors filed for protection from their creditors, they listed assets of between $10 million and $50 million, and debts of between $100 million and $500 million. (Cadence Bankruptcy News, Issue No. 7; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) CENTEX CORP: Fitch Downgrades Issuer Default Rating to 'BB' ----------------------------------------------------------- Fitch Ratings has downgraded Centex Corp.'s Issuer Default Rating and outstanding debt ratings: -- IDR to 'BB' from 'BB+'; -- Senior unsecured notes to 'BB' from 'BB+'; -- Unsecured bank credit facility to 'BB' from 'BB+'. Fitch has also affirmed CTX's 'B' short-term IDR and commercial paper. The Rating Outlook remains Negative. The downgrade reflects the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect negative trends in CTX's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges and more recently operating losses, which have led to untypically high debt leverage. As of Sept. 30, 2008, CTX's leverage as measured by debt to capitalization was 61%, which is higher than management's historical targeted range of approximately 35%-45%. However, CTX's liquidity position provides a buffer and supports the new ratings. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2009. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. CTX's ratings are supported by the company's strong management team, historically conservative financial policy and the strength and geographic diversity of its core homebuilding operations. The economies associated with large builders, significant geographic diversification, consistency of performance over an extended period of time, relatively low cost operating structure and a return-on-capital focus provide the framework to somewhat soften the margin impact of declining market conditions. In the current environment CTX's strategic focus is on asset management, asset efficiency and asset valuation risk assessments. CTX has continued to narrow the scope of its business to homebuilding, selling its subprime and home equity lending operations in July 2006 followed by the sale of its commercial construction operations in March 2007. In April 2008, CTX sold its home services operations and received $134.6 million of cash. Additionally, there will be limitations on asset growth: significant land purchases have to be re-approved, and there will be limits on off-balance sheet finance. There is an increased emphasis on asset turns at each division level. There is also an emphasis on reducing inventory levels. In March 2008, the company sold a portfolio of 27 properties (consisting of 8,545 lots) to a joint venture and sold a portfolio of five resort/second home properties to a third party. CTX generated $1.97 billion of cash flow from operations during the latest-twelve months from Sept. 30, 2008. CTX ended the September quarter with $1.3 billion of cash on the balance sheet. CTX controls roughly a 3.5-year supply of land based on latest 12 months home deliveries, 84.2% of which are owned and the balance controlled through options. (The options share of total lots controlled is down sharply over the past two years as the company has written off substantial numbers of options.) CHARTER COMMUNICATIONS: Moody's Downgrades PDR Ratings to 'Ca' -------------------------------------------------------------- Moody's Investors Service lowered the Probability-of-Default Rating for Charter Communications, Inc. to Ca from Caa2 and placed all ratings (other than the SGL3 Speculative Grade Liquidity Rating) for the Company and its subsidiaries under review for possible downgrade. The rating actions are prompted by the announcement that financial advisors have been engaged to initiate discussions with bondholders. "Charter's ratings have long reflected a high probability of default and a fundamental mismatch between the Company's liability structure and its business model," noted Moody's Senior Vice President Russell Solomon. The Ca PDR specifically reflects Moody's expectation that default (beyond those that occurred via various distressed exchanges over the last couple of years) is imminent and that a restructuring of the Company's balance sheet via some form of a much more material distressed exchange or bankruptcy filing is likely to occur pre- emptively in 2009, notwithstanding the sufficiency of liquid resources to maintain operations into 2010. Given the current state of the capital markets, Moody's believes that some meaningful restructuring may now finally be more palatable for all affected parties, although the complexity posed by the Company's multiple creditor classes may render an in-court restructuring process as the more likely format for resolution in Moody's estimation. The review will focus on the materiality of financial deleveraging that can be effected via a restructuring and the specific form that such a restructuring is likely to take. "Moody's continues to believe that at least $7 billion of the company's approximately $22 billion of rated debt obligations needs to be equitized," noted Solomon. Debt reduction of this magnitude should sufficiently mitigate (if not entirely eliminate) the Company's highly cash absorptive financial profile, which historically has been significantly constrained by heavy debt service costs related to its excessively leveraged and unsustainable capital structure. Moreover, rising debt service costs following heavy but necessary capital investment activity and ensuing liquidity-enhancing debt exchanges (albeit at higher interest rates) over the past few years have at times outpaced operational improvements. Depending on the final construct of the expected restructuring -- specifically the magnitude of change in junior-ranking liabilities which are the primary candidates for loss absorption -- and given the historical positioning of ratings in contemplation of this eventuality, the magnitude of requisite downgrades for any given credit class is expected to be minimal (and some ratings, with a specific bias towards the senior-most secured claims, may be just as likely to be confirmed at current levels). These summarizes Moody's ratings (note that LGD point estimates are subject to change pending conclusion of the rating review) for the Company and the rating actions: Charter Communications, Inc. * Corporate Family Rating -- Caa1, Review for Downgrade * Probability-of-default Rating -- to Ca from Caa2, Review for Downgrade * Senior unsecured notes -- Ca (LGD5 -- 87%), Review for Downgrade Charter Communications Holdings, LLC * Senior unsecured notes -- Ca (LGD5 -- 85%), Review for Downgrade CCH I Holdings, LLC * Senior unsecured notes -- Caa3 (LGD5 -- 77%), Review for Downgrade CCH I, LLC * Senior secured notes -- Caa3 (LGD4 -- 60%), Review for Downgrade CCH II, LLC * Senior unsecured notes -- Caa2 (LGD3 -- 42%), Review for Downgrade CCO Holdings, LLC * Senior unsecured notes -- Caa1 (LGD3 -- 34%), Review for Downgrade * Senior secured (1st lien - stock only) Term Loan -- B3 (LGD2 - - 29%), Review for Downgrade Charter Communications Operating, LLC * Senior secured (2nd lien - all assets) notes -- B3 (LGD2 -- 23%), Review for Downgrade * Senior secured (1st lien - all assets) Revolver & Term Loan -- B1 (LGD1 -- 6%), Review for Downgrade * Speculative Grade Liquidity Rating -- SGL-3, Unchanged The last rating action for Charter Communications was on July 2, 2008, when Moody's affirmed the company's Caa1 Corporate Family Rating and its Caa2 Probability-of-Default Rating. Headquartered in St. Louis, Missouri, Charter Communications is a domestic multiple system cable operator serving approximately 5.1 million basic video subscribers. CHARTER COMMUNICATIONS: S&P Junks Corporate Credit Rating --------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Charter Communications Inc. to 'CC' from 'B-'. The rating outlook is negative. At the same time, S&P placed all of its issue-level ratings on the company's debt on CreditWatch with developing implications, meaning that they could be either raised or lowered. The St. Louis, Missourri-based cable television operator had over $21 billion of reported debt at Sept. 30. The rating actions follow Charter's announcement that it has asked Lazard LLC to initiate discussions with the company's bondholders concerning financial alternatives to improve the company's balance sheet. S&P has noted for some time that Charter has inadequate liquidity and, specifically, that it would not have the capacity to meet its approximately $1.9 billion of debt maturities in 2010. Further, the company's excessive debt burden equates to over $4,000 per basic video subscriber -- a level that may exceed the market value of its subscriber base. S&P believes the most likely scenario is that Charter will offer to exchange at least some portion of its bonds for equity, or a combination of equity and debt, at a steep discount to face value. Given Charter's excessive debt level and the problematic upcoming maturities, S&P would consider such an offer to be a distressed exchange and tantamount to a default on the involved issues. At this time, S&P cannot speculate on when such a potential distressed exchange offer would be made or which bond issues would be targeted. "If Charter were to complete one or more distressed exchange offers, S&P anticipate lowering the corporate credit rating to 'SD' (indicating a selective default), and lowering ratings on the exchanged issues to 'D'," explained S&P's credit analyst Richard Siderman. "Shortly thereafter, S&P would reassign a new corporate credit rating to Charter. The developing CreditWatch implications on Charter's debt indicate the possibility that the new corporate credit rating could be as high as 'B' and, therefore, the issue- level ratings on the debt remaining after the exchange(s) could possibly be raised." In determining the potential for a 'B' corporate credit rating, S&P would examine how the debt exchanges, if consummated, would impact overall leverage and the manageability of debt maturities. Charter would need to realize sufficient debt reduction to enable the company to begin to generate positive free cash in order to warrant a 'B' rating. CHESAPEAKE ENERGY: S&P Affirms Corporate Credit Rating at 'BB' -------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its rating on Chesapeake Energy Corp., including the 'BB' corporate credit rating, and removed the ratings from CreditWatch, where they had been placed with positive implications on July 9, 2008. The outlook is stable. As of Sept. 30, 2008, Oklahoma City-based Chesapeake had $14 billion in debt. "The ratings actions primarily reflect concerns about falling natural gas prices, and S&P's reduced confidence that Chesapeake will improve near-term financial leverage measures," said S&P's credit analyst David Lundberg. "Chesapeake has an investment- grade caliber business risk profile, but the company's aggressive financial profile weighs on overall ratings. S&P believes that liquidity remains adequate." Chesapeake's satisfactory business risk profile enables the company to maintain somewhat higher debt levels relative to most 'BB' rated peers. With 12 trillion cubic feet equivalent of total proved reserves and 2.3 billion cubic feet equivalent of daily production, Chesapeake ranks among the largest independent exploration and production companies in North America. Operations are well-diversified geographically, and the company has good production growth prospects in several unconventional natural gas resource plays such as the Barnett, Fayetteville, Haynesville, and Marcellus Shales. Chesapeake's financial risk profile is aggressive, and credit measures have worsened in recent quarters. During the first nine months of 2008, funded debt increased by $3.4 billion, and the company entered into three new VPP (volumetric production payment) transactions, which S&P considers to have certain debt characteristics. CHRYSLER LLC: Default Risk Hinges on Government Action, S&P Says ---------------------------------------------------------------- Standard & Poor's Ratings Services said that, in light of the U.S. Senate's rejection of an emergency loan package for General Motors Corp. and Chrysler LLC, the risk of default by one or both of these companies over the next few months remains very high. The Bush Administration said it will consider using funds earmarked for the financial industry stabilization package to support the U.S. automakers' near-term liquidity needs. The U.S. Treasury said it stands ready to prevent an imminent failure of the automakers. However, the Treasury has not yet indicated how the automakers can access the funding provided through the Troubled Asset Relief Program, or TARP. It is also uncertain where TARP loans would stand in the automaker capital structure. Ford Motor Co. is not currently seeking federal loans, primarily because it has a large unused bank facility. The current ratings on all three automakers already reflect their high default risk and are therefore not changed by the U.S. Senate vote. S&P applies ratings in the 'CCC' category to companies that are highly likely to default on a debt payment and that depend on multiple factors beyond their control to meet their financial commitments. The 'CC' rating on GM reflects these risks, as well as the company's stated intention that it will seek to reduce its current debt burden by more than half as it attempts to reduce cash outflows and win support for the U.S. government-backed loans. S&P believes the most likely scenario is that GM will offer to exchange some or all of its outstanding debt for equity or new debt at a steep discount to face value. Given GM's weakening liquidity position, S&P considers such an offer to be a distressed exchange and, as such, is tantamount to a default. In S&P's view, the catalyst for a GM or Chrysler bankruptcy in the very near term is unchanged: liquidity dropping below the minimum levels needed to operate their capital-intensive vehicle manufacturing businesses. The automakers ordinarily make substantial payments to their suppliers early each month, and S&P believes the several billion dollars in outlays expected during the first few days of January 2009 could use up a substantial portion of both companies' respective cash balances, unless U.S. government support of some kind is forthcoming or the suppliers defer these payments. Consumer demand in the U.S. and other key markets has only worsened since these companies first said they might not have enough cash to support operations into early next year. In addition, S&P believes concerns about bankruptcies have added to the declines in GM's and Chrysler's sales and therefore heightened their cash use. In addition, S&P remains concerned about the spillover effects of an automaker failure on the North American parts suppliers. Many important suppliers sell parts to more than one automaker, and as S&P has stated previously, if GM or Chrysler should file for bankruptcy, withhold payments to suppliers, or be forced to halt operations, the repercussions to the suppliers would be dramatic. S&P placed 15 suppliers on CreditWatch with negative implications on Nov. 13, 2008, as a result of their significant exposure to the Michigan-based automakers. Ford's liquidity remains materially better than that of the other two Michigan-based automakers. However, if GM or Chrysler were to file for bankruptcy, Ford may have to use its liquidity to keep its supply base intact. S&P's recovery ratings on U.S. automaker debt are based on the assumption of a bankruptcy filing, multi-year reorganization, and eventual emergence. These ratings are not affected by the developments. Expected recovery prospects for secured and unsecured debtholders vary by automaker, largely reflecting the company-specific mix of secured and unsecured debt in the capital structure rather than vastly different fundamentals for each company. Ratings List General Motors Corp. Corporate Credit Rating CC/Negative/-- Senior Secured CCC Recovery Rating 1 Senior Unsecured CC Recovery Rating 4 Ford Motor Co. Corporate Credit Rating CCC+/Negative/-- Senior Secured CCC+ Recovery Rating 3 Senior Unsecured CCC- Recovery Rating 6 Chrysler LLC Corporate Credit Rating CCC+/Negative/-- Senior Secured $7 bil. first-lien term bank ln due 2013 B Recovery Rating 1 $2.0 bil. second-lien bank ln due 2014 CCC+ Recovery Rating 4 CIRCUIT CITY: Seeks to Extend Lease Decision Period Until March 10 ------------------------------------------------------------------ Circuit City Stores Inc. asks the U.S. Bankruptcy Court for the Eastern District of Virginia to extend the period within which it may either reject or assume leases to March 10, 2009. Section 365(d)(4) of the Bankruptcy Code provides that an unexpired lease of nonresidential real property under which the debtor is the lessee will be deemed rejected, and the trustee will immediately surrender that property to the lessor, if the trustee does not assume or reject the lease by the earlier of (i) the date that is 120 days after the Petition Date, or (ii) the date of the entry of an order confirming a plan of reorganization. However, Section 365(d)(4)(B) provides that the Court may extend the lease disposition period, prior to the expiration of the 120- day period, for 90 days on the request of the trustee or lessor for cause, and the Court may grant a subsequent extension only upon prior written consent of the lessor in each instance. By this motion, the Debtors ask the Court to extend the time within which they may assume or reject their unexpired leases of nonresidential real property, including subleases or other agreements to which any of the Debtors are a party that may be considered an unexpired lease of nonresidential real property, other than certain closing store leases and rejected leases. Specifically, the Debtors ask the Court to grant a 90-day extension of the original 120-day period within which they must assume or reject the Leases. Absent the relief requested, the Debtors' period for assuming or rejecting the Leases will expire on March 10, 2009. Although it may seem premature to seek an extension of the Lease Assumption Deadline within the first 30 days of the bankruptcy cases, the sought extension is not only warranted, but also necessary based on the facts and circumstances of the cases, avers the Debtors' proposed counsel, Gregg M. Galardi, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, in Wilmington, Delaware. Mr. Galardi notes that the Debtors have already made significant progress in evaluating their store-level operations having determined already that nearly 300 leases are unnecessary to their continued retail operations. He adds that as the Court was advised at the "First Day" hearing, certain requirements of the Debtors' DIP Financing impose upon them an obligation to seek the requested extension. On the Petition Date, the Debtors filed a request to reject 144 leases -- the Rejected Leases -- which were leases under which the Debtors no longer had retail operations. The Debtors also sought and obtained the Court's approval to continue store closing sales at 154 stores. The Debtors' determination to conduct store closing sales at those locations was based on various factors, including store profitability and location, M. Galardi relates. Notwithstanding their previous requests, the Debtors are far from finishing their evaluation of their leasehold interests and, thus, request the Court grant them an additional 90 days in which to determine whether to assume or reject the Leases because, among other reasons, a covenant under the DIP Facility requires that them to do so, and they are in the process of stabilizing their business operations and have not had a sufficient opportunity to review the Leases to determine whether assumption or rejection is warranted. Mr. Galardi contends that by granting the sought extension, the Debtors will be in a position to continue their business, which will benefit all other parties-in-interest, including the landlords for the Leases. Thus, he says, it is necessary to the success of the Debtors' cases that the Court enters an order extending the Lease Assumption Deadline. Schedules of the Debtors' unexpired Leases are available for free at: http://bankrupt.com/misc/List_of_Leases_1.pdf http://bankrupt.com/misc/List_of_Leases_2.pdf http://bankrupt.com/misc/List_of_Leases_3.pdf About Circuit City Stores, Inc. Headquartered in Richmond, Virginia, Circuit City Stores Inc. (NYSE: CC) -- http://www.circuitcity.com/-- is a specialty retailer of consumer electronics, home office products, entertainment software and related services. The company has two segments: domestic and international. Circuit City Stores, Inc. (NYSE: CC) together with 17 affiliates filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code on November 10 (E.D. Virg. Lead Case No.: 08-35653). InterTAN Canada, Ltd., which runs Circuit City's Canadian operations, also sought protection under the Companies' Creditors Arrangement Act in Canada. Gregg M. Galardi, Esq., and Ian S. Fredericks, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, are the Debtors' general restructuring counsel. Dion W. Hayes, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, are the Debtors' local counsel. The Debtors also tapped Kirkland & Ellis LLP as special financing counsel; Wilmer, Cutler, Pickering, Hale and Dorr, LLP, as special securities counsel; and FTI Consulting, Inc. and Rotschild Inc. as financial advisors. The Debtors' Canadian general restructuring counsel is Osler, Hoskin & Harcourt LLP. Kurtzman Carson Consultants LLC is the Debtors' claims and voting agent. The Debtors disclosed total assets of $3,400,080,000 and debts of $2,323,328,000 as of Aug. 31, 2008. (Circuit City Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CIRCUIT CITY: Presents Panasonic Settlement Agreement ----------------------------------------------------- Circuit City Stores, Inc., and its affiliated debtors ask the U.S. Bankruptcy Court for the Eastern District of Virginia to approve a settlement agreement they entered into with Panasonic Corporation of North America. The Debtors and Panasonic Consumer Electronics Company previously entered into a Consignment Agreement wherein Panasonic agreed to provide certain goods to the Debtors on a consignment basis. Panasonic has asserted that it filed UCC financing statements with the Virginia Secretary of State and that it notified the Debtors' then existing secured creditors with conflicting security interest, of its purchase money security interest in the Consigned Products. Panasonic also advised the Debtors that the Consignment Agreement would be terminated unless all past due amounts were paid within 10 days. In a November 6, 2008 letter, Panasonic purported to terminate the Consignment Agreement and instructed the Debtors to stop selling the Consigned Products immediately. The Debtors and Panasonic dispute whether Panasonic had a contractual right to terminate the Consignment Agreement. In addition, the Debtors and Panasonic dispute whether the Debtors had the right to sell, transfer, encumber or dispose of the Consigned Products after termination of the Consignment Agreement. Pursuant to an interim agreement between the Debtors and Panasonic, the Debtors have sold Consigned Products from November 10, 2008, through November 16, 2008 and have paid $3,770,565 plus additional amounts to Panasonic. The Debtors have requested that Panasonic deliver new products subject to credit terms, however, Panasonic refused to do so unless the Debtors pay $9,382,247, which Panasonic asserts is the amount due for Consigned Products sold to the Debtors prepetition. The Debtors, however, believe that the Prepetition Consignment Claim is $7,900,000, which is subject to certain chargebacks and set-offs for $3,740,102. Accordingly, the Debtors and Panasonic entered into the Settlement Agreement to timely resolve certain of their disputes without incurring the costs, delays and uncertainty of litigation. The material terms of the Settlement Agreement are: (i) Panasonic agrees to the postpetition sale of the Consigned Products provided that the Debtors will pay Panasonic the Wind-down Payments two days after the sale of a Consigned Product. (ii) in the event a dispute arise over the amount of Wind-down Payments, the Debtors will pay the undisputed portion and the remainder will be placed in a segregated interest- bearing account, and if unresolved within two days, the dispute will be resolved by the Court. (iii) subject to Court approval, to be obtained no later than December 10, 2008, the Debtors will pay the Undisputed Prepetition Consignment Claim plus other amounts due to Panasonic from prepetition sales of Consigned Products. (iv) the Debtors and Panasonic will reconcile the amount of the Prepetition Consignment Claim prior to December 10, 2008. If reconciliation is not achieved by December 10, the disputed portion of the Claim will be placed in an interest-bearing segregated escrow account, which release is subject to an agreement between the Debtors and Panasonic or Court approval. (v) Panasonic will ship new products to the Debtors on credits terms of up to $2 million payable in five days from invoice date, subject to, among others, Panasonic's receipt of full payment in cash of the Undisputed Prepetition Consignment Claim plus other amounts owing to Panasonic after reconciliation. (vi) the Consignment Agreement will be deemed terminated as of November 6, 2008, and will no longer be in effect. (vii) Panasonic reserves its right to seek allowance and payment of reclamation and Section 503(b)(9) claims, secured claims or other claims that Panasonic may hold against the Debtors or to enforce any right against the Debtors. (viii) the Debtors will be entitled to offset the Chargeback Claim against distributions payable to Panasonic on account of any allowed claim or administrative expense, except for the Wind-Down Payments, Prepetition Consignment Claim or payments relating to any CIA Sale. The offset will only be to the extent that the Chargeback claim is either undisputed or the Chargeback Claim is determined by the Court. The Debtors reserve their right to seek direct payment of the Chargeback Claim. The Debtors are in the view that a probable outcome in litigation with Panasonic is that Panasonic has a perfected consignment interest in the Consigned Products and an administrative expense claim under Section 503(b)(9) for the merchandise received by the Debtors. Moreover, Panasonic would likely be entitled to priority with respect to the value of the Consigned Products delivered within the 20-day period. The Debtors further find that the payment contemplated by the Settlement Agreement will not diminish the assets of the estates and is consistent with the priority of claims under the Bankruptcy Code. The Debtors further ask the Court to consider their request on December 5, 2008. The Debtors said they want to ensure that sufficient Panasonic merchandise will be available during the holiday shopping season. The Debtors believe that delaying the motion beyond the December 5 hearing could significantly diminish the value of the Settlement Agreement to the estates and reduce the Debtors' chances for a successful restructuring. More importantly, the Debtors stress that it would constitute an event of default under the Settlement Agreement should an order of the Court approving the Settlement Agreement is not entered by December 10, 2008. About Circuit City Stores, Inc. Headquartered in Richmond, Virginia, Circuit City Stores Inc. (NYSE: CC) -- http://www.circuitcity.com/-- is a specialty retailer of consumer electronics, home office products, entertainment software and related services. The company has two segments: domestic and international. Circuit City Stores, Inc. (NYSE: CC) together with 17 affiliates filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code on November 10 (E.D. Virg. Lead Case No.: 08-35653). InterTAN Canada, Ltd., which runs Circuit City's Canadian operations, also sought protection under the Companies' Creditors Arrangement Act in Canada. Gregg M. Galardi, Esq., and Ian S. Fredericks, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, are the Debtors' general restructuring counsel. Dion W. Hayes, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, are the Debtors' local counsel. The Debtors also tapped Kirkland & Ellis LLP as special financing counsel; Wilmer, Cutler, Pickering, Hale and Dorr, LLP, as special securities counsel; and FTI Consulting, Inc. and Rotschild Inc. as financial advisors. The Debtors' Canadian general restructuring counsel is Osler, Hoskin & Harcourt LLP. Kurtzman Carson Consultants LLC is the Debtors' claims and voting agent. The Debtors disclosed total assets of $3,400,080,000 and debts of $2,323,328,000 as of Aug. 31, 2008. (Circuit City Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CIRCUIT CITY: Committee Demands Information on 1st Day Orders ------------------------------------------------------------- The official committee of unsecured creditors formed in Circuit City Stores, Inc.'s Chapter 11 cases informs the U.S. Bankruptcy Court for the Eastern District of Virginia that it does not object to the substantive relief sought in the Debtors' first day motions to: -- pay prepetition claims of certain foreign vendors and service providers; -- pay prepetition wages, compensation and employee benefits -- assume the Agency Agreement among the Debtors, Hilco Merchant Resources, LLC, and Gordon Brothers Retail Partners, LLC; -- pay prepetition sales, use, trust fund and other taxes, and related obligations; -- pay certain prepetition shipping and delivery charges; and -- pay contractors in satisfaction of liens. The Creditors Committee says it simply wants to secure the right to obtain information and other data related to the requests at defined intervals going forward. To facilitate and enable it to thoroughly review and analyze the Debtors' operations, financing, liquidity needs and models, restructuring efforts and prospects for reorganization, the Creditors Committee says it must be in a position to have a "free-flow" of information with the Debtors. While the Debtors and their professionals have expressed a willingness to cooperate on the proposed flow of information, the Creditors Committee wants to ensure that the Court's orders granting the First-Day Motions also provide for the same. To this end, the Creditors Committee asks the Court to revise each of the First Day Orders to specifically provide for the transmittal to the Creditors Committee of all information related to any of the Debtors' actions taken in conjunction with the First Day Orders. The Creditors Committee seeks, among other things, these specific information: -- for the Foreign Vendor Order, weekly reports of credit terms agreed with vendors and service providers, their names, and any compromises and amounts of disputed claims; -- for the Contractor Order, weekly reports listing compromises and amounts of disputed claims together with the names of any compromising contractors; -- for the Shippers Order, weekly reports listing compromises and amounts of disputed claims together with the names of any compromising shippers; and -- for the Wage Order, complete report of amounts paid and recipients above the $10,950 priority amount contained in Section 507(b) of the Bankruptcy Code. As the review process is in its infancy stage, the Creditors Committee reserves the right to seek additional information. About Circuit City Stores, Inc. Headquartered in Richmond, Virginia, Circuit City Stores Inc. (NYSE: CC) -- http://www.circuitcity.com/-- is a specialty retailer of consumer electronics, home office products, entertainment software and related services. The company has two segments: domestic and international. Circuit City Stores, Inc. (NYSE: CC) together with 17 affiliates filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code on November 10 (E.D. Virg. Lead Case No.: 08-35653). InterTAN Canada, Ltd., which runs Circuit City's Canadian operations, also sought protection under the Companies' Creditors Arrangement Act in Canada. Gregg M. Galardi, Esq., and Ian S. Fredericks, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, are the Debtors' general restructuring counsel. Dion W. Hayes, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, are the Debtors' local counsel. The Debtors also tapped Kirkland & Ellis LLP as special financing counsel; Wilmer, Cutler, Pickering, Hale and Dorr, LLP, as special securities counsel; and FTI Consulting, Inc. and Rotschild Inc. as financial advisors. The Debtors' Canadian general restructuring counsel is Osler, Hoskin & Harcourt LLP. Kurtzman Carson Consultants LLC is the Debtors' claims and voting agent. The Debtors disclosed total assets of $3,400,080,000 and debts of $2,323,328,000 as of Aug. 31, 2008. (Circuit City Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CIRCUIT CITY: Seeks to Employ Mcguirewoods as Ch. 11 Co-Counsel --------------------------------------------------------------- Circuit City Stores, Inc., and its affiliated debtors authority from the U.S. Bankruptcy Court for the Eastern District of Virginia to employ McGuireWoods LLP as their bankruptcy and restructuring co-counsel, nunc pro tunc to the Petition Date. The firm will be employed under a general retainer to perform the legal services that will be necessary during their Chapter 11 cases. During the fall of 2008, the Debtors engaged McGuireWoods as restructuring co-counsel, and sought its services with respect to, among other things, the Debtors' financial restructuring efforts and preparation for the potential commencement and prosecution of the cases. The Debtors believe that McGuireWoods' continued representation is critical to their efforts to restructure their businesses because the firm has become intimately familiar with the Debtors' businesses, legal and financial affairs and practices. They are also retaining Skadden, Arps, Slate, Meagher & Flom LLP as bankruptcy and restructuring co-counsel. The two firms have assured the Debtors that they will use their best efforts to avoid the duplication of services. As co-counsel, McGuireWoods will, among other things: (a) advise the Debtors with respect to their powers and duties as debtors and debtors-in-possession in the continued management and operation of their business and properties; (b) advise and consult on the conduct of the Debtors' bankruptcy cases, including all of the legal and administrative requirements of operating in Chapter 11; (c) attend meetings and negotiate with representatives of creditors, Debtors' employees and other parties-in- interest; (d) advise the Debtors in connection with any contemplated sales of assets or business combinations; and (e) advise the Debtors in connection with postpetition financing and cash collateral arrangements, and negotiate and draft related document. In connection with the prepetition engagement, McGuireWoods currently holds a retainer of $370,000. Pursuant to the engagement, the Retainer will serve as security for the payment of all unpaid prepetition and postpetition fees and expenses owed to McGuireWoods by the Debtors. The Debtors and McGuireWoods contemplate that the Retainer will be held by McGuireWoods and applied first towards any outstanding prepetition fees and expenses, and then, towards McGuireWoods' final billing. According to McGuireWoods' books and records, (i) from January 1, through November 9, 2008, McGuireWoods received prepetition payments from the Debtors totaling $1,654,105, and (ii) from August 11 through November 9, 2008, McGuireWoods received prepetition payments totaling $843,375, approximately $370,000 of which is being held as a retainer for the engagement. McGuireWoods has filed with the Court a disclosure of compensation with respect to the retainer on November 19, 2008. McGuireWoods will be paid based on its standard hourly rates, and will be reimbursed for expenses and costs: Position Hourly Rate -------- ----------- Partners $475 to $715 Counsels $375 to $450 Associates $295 to $450 Legal assistants $150 to $255 Support staff $150 to $255 Dion W. Hayes, Esq., a partner at McGuireWoods, assures the Court that his firm is a "disinterested person," as that term is defined in Section 101(14) of the Bankruptcy Code. About Circuit City Stores, Inc. Headquartered in Richmond, Virginia, Circuit City Stores Inc. (NYSE: CC) -- http://www.circuitcity.com/-- is a specialty retailer of consumer electronics, home office products, entertainment software and related services. The company has two segments: domestic and international. Circuit City Stores, Inc. (NYSE: CC) together with 17 affiliates filed a voluntary petition for reorganization relief under Chapter 11 of the Bankruptcy Code on November 10 (E.D. Virg. Lead Case No.: 08-35653). InterTAN Canada, Ltd., which runs Circuit City's Canadian operations, also sought protection under the Companies' Creditors Arrangement Act in Canada. Gregg M. Galardi, Esq., and Ian S. Fredericks, Esq., at Skadden, Arps, Slate, Meagher & Flom, LLP, are the Debtors' general restructuring counsel. Dion W. Hayes, Esq., and Douglas M. Foley, Esq., at McGuireWoods LLP, are the Debtors' local counsel. The Debtors also tapped Kirkland & Ellis LLP as special financing counsel; Wilmer, Cutler, Pickering, Hale and Dorr, LLP, as special securities counsel; and FTI Consulting, Inc. and Rotschild Inc. as financial advisors. The Debtors' Canadian general restructuring counsel is Osler, Hoskin & Harcourt LLP. Kurtzman Carson Consultants LLC is the Debtors' claims and voting agent. The Debtors disclosed total assets of $3,400,080,000 and debts of $2,323,328,000 as of Aug. 31, 2008. (Circuit City Bankruptcy News, Issue No. 5; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). CLAYTON WILLIAMS: S&P Keeps B Sr. Unsec. Rating; Outlook Stable --------------------------------------------------------------- Standard & Poor's Ratings Services said that, following an industry review of oil and gas exploration and production companies, it revised the outlook to stable from positive on a number of speculative-grade companies while affirming the ratings. The review was prompted by S&P's recent revision of its oil and gas pricing assumptions in light of the rapid decline in hydrocarbon prices and S&P's expectation that lower prices will prevail for the near to medium term. S&P revised the outlook on Forest Oil Corp. (BB-) to stable from positive because S&P expects worsening credit metrics. At S&P's 2009 pricing assumptions, S&P expects debt to EBITDA to be roughly 3x, which well exceeds S&P's published upgrade trigger of 2x. In addition to the lower pricing assumptions, Forest's debt is higher than S&P previously expected because the company has not been able to consummate anticipated asset sales. Liquidity should remain adequate in 2009. S&P expects Forest to lower its capital budget from the 2008 level to be in line with internally generated cash flows. S&P revised the outlook on Whiting Petroleum Corp. (BB-) to stable from positive. Although the company has reported significant production growth throughout 2008, primarily in the Bakken oil formation in the northern U.S.), positive rating momentum has stalled because of the lower price environment. Furthermore, Whiting is vulnerable to further price declines because of its minimal hedge position in 2009. S&P does highlight, though, that the company's liquidity position of about $400 million as of Sept. 30, 2008, and its significant covenant cushion are adequate for the rating. On Clayton Williams Energy Inc. (B) S&P revised the outlook to stable from positive because of weaker credit measures, in light of S&P's revised crude oil and natural gas price assumptions. Although near-term liquidity remains adequate, the outlook revision reflects S&P's expectation that Clayton Williams will not be able to sustain its recent financial performance in the near term. S&P also expect Clayton's operating cash flows to weaken, given the company's "unhedged" position in 2009 and a relatively high cost structure. The revision of the outlook on Venoco Inc. (B) to stable from positive stems from falling commodity prices. This decline reduces S&P's confidence that credit measures will improve materially in the near term. The company is selling or monetizing (through a volumetric production payment) its interest in the Hastings complex to Denbury Resources Inc. (BB/Stable/--), which will likely result in debt repayment and increase availability under the revolving credit facility. However, the lower price environment will probably reduce the proceeds. Ratings List Ratings Affirmed, Outlook Revised Clayton Williams Energy Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sr unsecd B+ B+ Recovery 2 2 Forest Oil Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sr unsecd B+ B+ Recovery 5 5 Venoco Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sub debt B B Recovery 3 3 Whiting Petroleum Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sub debt BB- BB- Recovery 3 3 CNL FUNDING: Moody's Downgrades Ratings on Seven Classes of Notes ----------------------------------------------------------------- Moody's Investors Service has downgraded six classes of notes issued by CNL Funding 98-1, LP and 3 classes of notes issued by CNL Funding 99-1, LP. The three downgraded notes from the latter transaction remain on review for possible further downgrade; additionally, five classes were placed on review for possible downgrade. The pools are supported by restaurant franchise loans. The rating actions are due to deterioration in collateral performance of the pools and the anticipated erosion of credit support. The complete ratings actions are: CNL Funding 98-1, LP -- Class C-1, Downgraded to A3 from A2, previously on 8/18/1998 Assigned A2 -- Class C-2, Downgraded to A3 from A2, previously on 8/18/1998 Assigned A2 -- Class D-1, Downgraded to Ba2 from Baa1, previously on 8/12/2008 Placed on review for possible downgrade -- Class D-2, Downgraded to Ba1 from Baa1, previously on 8/12/2008 Placed on review for possible downgrade -- Class E-1, Downgraded to B3 from Baa3, previously on 8/12/2008 Placed on review for possible downgrade -- Class E-2, Downgraded to B2 from Baa3, previously on 8/12/2008 Placed on review for possible downgrade CNL Funding 99-1, LP -- Class A-2, Placed on review for possible downgrade, currently Aaa, previously on 11/24/1999 Assigned Aaa -- Class B, Placed on review for possible downgrade, currently Aa2, previously on 11/24/1999 Assigned Aa2 -- Class C, Placed on review for possible downgrade, currently A2, previously on 11/24/1999 Assigned A2 -- Class D, Placed on review for possible downgrade, currently A3, previously on 11/24/1999 Assigned A3 -- Class IO, Placed on review for possible downgrade, currently Aaa, previously on 11/24/1999 Assigned Aaa -- Class E, Downgraded to Ba1 from Baa2, remains on review for downgrade, previously on 11/24/1999 Assigned Baa2 -- Class F, Downgraded to B1 from Ba2, remains on review for downgrade, previously on 11/24/1999 Assigned Ba2 -- Class G, Downgraded to Caa3 from B2, remains on review for downgrade, previously on 11/24/1999 Assigned B2 Considerations for the rating actions: In CNL Funding 98-1, LP, the credit support for the certificates consists of subordination and overcollateralization of the bonds by the loans. The fixed and floating rate certificates are backed by fixed and floating rate loans; the fixed and floating rate pools are cross supported with losses allocated to both subpools in reverse alphabetical order. Class B through Class H certificates are subordinated to Class IO and Class A certificates, providing a total credit support of 89.4% to Class A certificates. The subordinated certificates provide credit support of 70.2% to Class B certificates; 47.1% to Class C certificates; 31.7% to Class D certificates; and 24% to Class E. The current overcollateralization amount is zero. The actions are driven by the recent Chapter 7 bankruptcy filing of S&A Restaurants Corp., the holding company for Bennigan's and Steak & Ale restaurants which constitute approximately 27.8% ($19.5MM) of the aggregate pool balance, as of November 2008 distribution date. These loans, which are fixed rate, have been transferred to special servicing where most of these properties are being marketed for sale. Appraisals obtained by GE reflect collateral values ranging from $10.4MM (appraised land value for fee mortgage properties only) to $18.5MM (appraised aggregate income value for fee and leasehold mortgage properties). In addition, future problem loans could be substantial as both fixed rate and adjustable rate sub-pools have a high percentage of borrowers with a low Fixed Charge Coverage Ratio. In the Fixed- Rate sub-pool 53.4% of the loans by principal balance have a FCCR less than 1.50 while the Adjustable-Rate sub-pool has nearly 63% of the loan balance with a FCCR less than 1.25. The final rating actions are based on the pro-forma credit enhancement following the liquidation of the Steak & Ale properties. In CNL Funding 99-1, LP, the credit support for the certificates also consists of subordination and overcollateralization of the bonds by the loans. Class B through Class H certificates are subordinated to Class IO and Class A certificates, providing a total credit support of 39.5% to Class A certificates. The subordinated certificates provide credit support of 28.8% to Class B certificates; 22.4% to Class C certificates; 19.2% to Class D certificates; 12.7% to Class E; 9.5% to Class F. and 4.2% to Class G. The current overcollateralization amount is zero. The actions are driven by the transfer of Valenti Management loans, which represent 26.6% of the aggregate principal balance, to special servicing for a covenant default. In addition, there has been a decline in the weighted average FCCR for the pool; with 69.2% of the loans by principal balance have an FCCR below 1.20. The final rating actions are based on the pro-forma credit enhancement levels. Additionally Moody's will monitor the transaction, in part for the Valenti Management loans transfer, and will be considering expected recoveries during the review period to help determine the impact of future writedowns on credit support for the listed rated class. COLEMAN CABLE: Moody's Affirms Corporate Family Rating at 'B1' -------------------------------------------------------------- Moody's Investors Service affirmed Coleman Cable, Inc.'s B1 corporate family rating and SGL-2 speculative grade liquidity rating, but revised its ratings outlook to negative from stable. The outlook revision reflects Moody's concern over the potential for a sustained contraction in the company's sales and volumes given its exposure to weakening end-markets (including automotive, appliance, and other consumer oriented products). OEM segment volumes in lbs. decreased 18% in the September 2008 quarter over the same period in 2007. Additionally, although the distribution segment has performed well year-to-date through September 2008 (largely due to successful price increases and the volume contribution from acquisitions), this business experienced increasing signs of weakness at the end of the quarter as customers seek to reduce their inventory levels in the wake of uncertain demand and deflating copper prices. Notwithstanding these concerns, the affirmation of the B1 rating incorporates Moody's view that Coleman's credit metrics are still appropriate for the ratings category as well as its good liquidity position and continued emphasis on debt reduction. These ratings were affirmed: -- Corporate family rating at B1; -- Probability-of-default rating at B1; -- Speculative grade liquidity rating at SGL-2; -- $240 million 9.875% senior unsecured notes due 2012 at B2 (LGD5, 75%). The last rating action was on March 21, 2007, when Moody's upgraded Coleman's corporate family rating to B1 from B2 and assigned a stable ratings outlook. This action completed a ratings review for possible upgrade that was initiated on March 12, 2007. Headquartered in Waukegan, Illinois, Coleman Cable, Inc. is a leading designer, developer, manufacturer and supplier of electrical wire and cable products for consumer, commercial and industrial applications, with operations primarily in the United States. Coleman reported sales of $1.1 billion through the twelve months ended September 30, 2008. COMFORT CO: Files Joint Chapter 11 Plan and Disclosure Statement ---------------------------------------------------------------- Comfort Co. Inc. and its debtor-affiliates delivered on Nov. 26, 2008, to the Honorable Mary F. Walrath of the United States Bankruptcy Court for the District of Delaware a joint Chapter 11 plan of reorganization and a disclosure statement explaining the plan. The Debtors said the on-time filing of its plan is a major step toward their emergence from Chapter 11 in the middle of the first quarter of 2009. The Debtors further said they expect to emerge from Chapter 11 without utilizing all of the debtor-in-possession financing made available to them for operations during this time. In addition, the Debtors noted that strong, long-standing relationships with suppliers and customers, as well as the support of their lenders, are helping them stay on -- or ahead of -- their chapter 11 plan. The Debtors further said that founder Michael Fux will resume his role as chief executive officer upon their emergence from Chapter 11. Mr. Fux will become a part owner of the Debtors and also provide additional liquidity as they emerge from Chapter 11. The Debtors propose a Feb. 4, 2008 hearing to consider confirmation of the plan. Overview of the Plan The plan contemplates payment in full in cash to holders of allowed administrative claims, priority tax claims, DIP claims, other priority claims, and other secured claims. The plan further contemplates the distribution of: i) term notes and shares representing an aggregate of at least 75% of the issued new equity to holders of allowed first lien secured claims; ii) shares representing an aggregate of 6.8% of the issued new equity and 68% of the net proceeds of all recoveries on avoidance actions to holders of first lien deficiency claims; iii) shares representing an aggregate of 6.8% of the issued new equity and 68% of the net proceeds of all recoveries on avoidance actions to holders of second lien claims; and iv) shares representing an aggregate of 0.9% of the issued new equity and 9% of the net proceeds of all recoveries on avoidance actions to holders of allowed general unsecured claims other than first lien deficiency claims and second lien claims; In addition, the plan will allow holders of intercompany claims and intercompany equity interest or claims. Holders of existing equity interests will not receive any distribution under the plan. The Debtors need to obtain exit financing in order to finance distributions as set for in the Plan and to fund their operations. The Debtors will secure commitments for exit financing in amounts sufficient to fund the payments required under the plan and to operate their businesses going forward. The plan classifies interests against and liens in the Debtors in nine groups. The classification of treatment of interests and claims are: Treatment of Interests and Claims Type Estimated Class of claims Treatment Recovery ----- --------- --------- --------- N/A administrative unimpaired 100% N/A priority tax unimpaired 100% N/A DIP claims unimpaired 100% 1 other priority unimpaired 100% 2 first lien unimpaired secured 3 other secured unimpaired 4 first lien impaired deficiency 5 second lien impaired 6 general unsecured impaired 7 intercompany unimpaired 100% 8 intercompany unimpaired 100% equity interests 9 existing equity impaired 0% Each holder of a claim in Class 2, 4, 5, or 6 will be entitled to vote for the plan. Holders of Class 1 other priority claims are entitled to priority pursuant to Section 507(a) of the Bankruptcy Code -- other than administrative claims and priority Tax Claims. Claims may include: -- unsecured Claims for accrued employee compensation earned within 180 days prior to commencement of these Chapter 11 Cases to the extent of $10,950 per employee; and -- contributions to employee benefit plans arising from services rendered within 180 days prior to the commencement of these Chapter 11 Cases, but only for each such plan to the extent of (i) the number of employees covered by such plan multiplied by $10,950, less (ii) the aggregate amount paid to such employees as a priority for wages, salaries or commissions, plus the aggregate amount paid on behalf of such employees to other benefit plans. Each holder of Class 2 first lien secured claims will be deemed fully secured and allowed in the aggregate amount of $125 million. On the effective date, the reorganized debtors will: a) execute and deliver to the First Lien Agent, on behalf of holders of First Lien Secured Claims, the Restructured Term Loan Agreement, and pursuant thereto issue to the holders of First Lien Secured Claims term notes in the aggregate original principal amount of $100 million, with the these general terms: -- secured by a Lien on substantially all of the Reorganized Debtors' assets and property, junior to the Lien securing the Exit Facility; -- interest will be payable in kind at LIBOR plus 8.0%, except that interest shall be payable in Cash at the rate of 1% per annum, in either case on a quarterly basis: provided, however, that all interest shall be paid in Cash at LIBOR plus 6.0% upon satisfaction of certain financial metrics to be set forth in the Restructured Term Loan Agreement; -- the maturity date of the Restructured Term Loan Agreement will be paid on the six year anniversary of the Effective Date; -- Until the earlier of the third anniversary of the Effective Date, and the date on which all interest on the term notes will be payable in Cash, the transfer by a holder of any term notes under the Restructured Term Loan Agreement must be accompanied by the transfer to the same transferee of a like percentage of the shares of Issued New Equity then held by such holder; and -- the obligations under the Restructured Term Loan Agreement will be guaranteed by the Guarantors; and b) issue to the First Lien Agent, on behalf of the holders of First Lien Secured Claims, shares representing an aggregate of at least 75% of the Issued New Equity. Holders of Class 4 first lien deficiency claims will be deemed allowed general unsecured Claims in the aggregate amount of $155,693,443. On the effective date, the holder will receive the, on a pro rata basis: a) shares representing an aggregate of 6.8% of the Issued New Equity; and b) 68% of the net proceeds of all recoveries on Avoidance Actions. Holders of Class 5 second lien claims will be deemed allowed general unsecured claims in the aggregate amount of $52,208,998. On the Effective Date, holder will receive, on a Pro Rata basis: a) shares representing an aggregate of 2.3 % of the Issued New Equity; and b) 23% of the net proceeds of all recoveries on Avoidance Actions. After the plan's initial distribution date, holders of Class 6 of general unsecured claims will receive its pro rata share of: a) shares representing an aggregate of 0.9% of the Issued New Equity; and b) 9% of the net proceeds of all recoveries on Avoidance Actions. All intercompany claims will remain outstanding and will not be discharged by the Plan but will be liquidated while intercompany equity interests will be reinstated and holders will retain their intercompany equity interests. Existing Equity Interests will be cancelled and deemed worthless as of the plan's effective date. A full-text copy of Comfort Co.'s Joint Chapter 11 Plan of Reorganization is available for free at: http://ResearchArchives.com/t/s?363c A full-text copy of Comfort Co.'s Disclosure Statement is available for free at: http://ResearchArchives.com/t/s?363d About Comfort Co. Comfort West Long Branch, New Jersey-based Co., Inc. -- http://www.sleepinnovations.com/-- makes and sells foam bedding, sleep products and accessories. The company and its affiliates filed for Chapter 11 protection on Oct. 3, 2008 (Bankr. D. Delaware Case No. 08-12305). Michael R. Lastowski, Esq., at Duane Morris LLP assists the company in its restructuring effort. The U.S. Trustee for Region appointed creditors to serve on an Official Committee of Unsecured Creditors. Lowenstein Sandler PC and Connolly Bove Lodge & Hutz LLP represent the Committee in these cases. The company listed assets of $100 million to $500 million and debts of $100 million to $500 million. CORPORACION DURANGO: U.S. Court Cedes to Mexico Main Proceeding --------------------------------------------------------------- Corporacion Durango SAB, has won recognition from the U.S. Bankruptcy Court for the Southern District of New York that the Mexico court won recognition of a Mexico court as home to the foreign main proceeding for the company's restructuring. According to Bloomberg News' Bill Rochelle, the order signed by the U.S. Bankruptcy Court contained an exception to the otherwise broad prohibition against all creditor actions in the United States. As a compromise with senior noteholders, the bankruptcy judge allowed suits in any court so the noteholders may challenge efforts by the company to cancel the notes. As reported by the Troubled Company Reporter on Oct. 14, Corporacion Durango won from the Bankruptcy a temporary restraining order from lawsuits against it after it filed a Chapter 15 petition on Oct. 6, 2008. Chapter 15 allows a U.S. Bankruptcy Judge to aid a bankruptcy pending in another country. Durango simultaneously commenced a bankruptcy reorganization in a The First Federal District Court in Durango began simultaneous proceedings to protect the Corporacion Durango's creditors in Mexico. On October 6, 2008, two U.S.-based subsidiaries of Corporacion Durango filed for Chapter 11 -- Paper International, Inc., and Fiber Management of Texas, Inc. in the U.S. Bankruptcy Court. See: http://www.internationalpaper.com About Corporacion Durango Durango, Mexico-based Corporacion Durango S.A.B. de C.V. produces brown paper and packaging products. Its packaging division, Empresas Titan, manufactures corrugated packaging in Mexico. It also produces newsprint through Grupo Pipsamex. After The First Federal District Court in Durango approved its plan of reorganization and declared the termination of its "Concurso Mercantil" proceeding, the Company filed for Chapter 15 bankruptcy (Bankr. S.D. N.Y. Case No. 08-13911) on Oct. 6, 2008. Two affiliates filed for Chapter 11 bankruptcy protection separately on the same day. John K. Cunningham, Esq., at White & Case, LLP, represents the Debtors in their restructuring efforts. In its filing, the Lead Debtor listed estimated assets of more than US$1 billion and estimated debts of more than US$1 billion. CULP INC: Receives Notice of Listing Non-Compliance from Nasdaq --------------------------------------------------------------- The New York Stock Exchange provided formal notice regarding Culp, Inc.'s non-compliance with the NYSE's continued listing standards. NYSE said that for more than 30 consecutive trading days, the company's average market capitalization was less than $75 million ($32.8 million as of Dec. 11, 2008), and its reported shareholders' equity was below $75 million ($46.5 million as of Nov. 2, 2008. Under applicable NYSE procedures, unless the NYSE determines otherwise, the company has 45 days from the date of its receipt of the notice to submit a plan to the NYSE to demonstrate its ability to achieve compliance with the continued listing standards within 18 months. The company intends to submit a plan to demonstrate compliance with the listing standards within the required time frame. If the plan is accepted, the NYSE will monitor the company on a quarterly basis and can deem the plan period over prior to the end of the 18 months if a company is able to demonstrate returning to compliance with the applicable continued listing standards, or achieving the ability to qualify under an original listing standard, for a period of two consecutive quarters. Regardless of this plan, if the company's average market capitalization over a 30 trading-day period falls below $25 million, the NYSE is expected to start immediate delisting procedures. Beginning on or about Dec. 18, 2008, the NYSE will make available on its consolidated tape an indicator, "BC," to indicate that the company is below the NYSE's quantitative listing standards. The indicator will be removed at such time as the company is deemed compliant with the NYSE's continued listing standards. About Culp, Inc. Headquartered in High Point, North Carolina, Culp, Inc. (NYSE:CFI) -- http://www.culpinc.com/-- markets mattress fabrics for bedding and upholstery fabrics for furniture. The company's fabrics are used principally in the production of bedding products and residential and commercial upholstered furniture. CYBERSURF CORP: Didn't File Annual Report, Gets Cease Trade Order ----------------------------------------------------------------- Cybersurf Corp. was unable to file its audited financial statements and other material for the fiscal year ended June 30, 2008 by the Oct. 28, 2008, deadline set forth in National Instrument 51-102-Continuous Disclosure Obligations. A Management Cease Trade Order was issued by the Alberta Securities Commission on Nov. 5, 2008. This Default Status Report is issued pursuant to National Policy 12-203 Cease Trade Orders for Continuous Disclosure Defaults. The company continues to implement its remediation plan as outlined in its Notice of Default filed on Oct. 5, 2008, and amended on Nov. 5, 2008. The company has not yet made a decision on hiring a new auditor or engaging its existing auditor. It has met with a number of potential replacement auditors and has narrowed it choice down to two potential replacement auditor firms. It has received audit proposals and is currently reviewing them. It said expects to make a decision by Dec. 16, 2008. The company continues to expect to file its financial statements by Dec. 27, 2008. The company intends to continue to satisfy the provisions of the Alternative Information Guidelines by issuing bi-weekly Default Status Reports in the form of news releases, so long as it remains in default. According to the Company, its not in any insolvency proceedings at the present time and there is no other material information relating to its affairs that has not been generally disclosed. About Cybersurf Headquartered in Calgary, Canda, Cybersurf Corp. (TSX VENTURE:CY) -- http://www.cybersurf.com,and http://www.cybersurf.net-- provides Internet and communications services in the United States and Canada DELTA FINANCIAL: Delaware Court Confirms Second Amended Plan ------------------------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware has confirmed Delta Financial Corp.'s Second Amended Joint Chapter 11 Plan of Liquidation. Bankruptcy Law360 reports that the Plan was confirmed at a hearing on Dec. 8. According to an attorney for the Debtors, Bankruptcy Law360 continues, the Plan is currently awaiting the Court's approval of a final order. Bankruptcy Data says the Plan transfers the Debtors' assets and liabilities to a liquidating trust, which will be administered by a liquidating trustee. Bankruptcy Data says the liquidating trustee will liquidate the Debtors' remaining assets; evaluate, pursue or settle potential causes of action, as appropriate; review the universe of claims in the Chapter 11 cases; fix the allowed amount of those claims and then distribute the proceeds from the assets to the creditors in a manner consistent with the priority scheme in the Bankruptcy code. Once the liquidating trustee liquidates all assets, fixes all claims and conveys all distributions to creditors, the liquidating trustee will dissolve the liquidating trust pursuant to the terms of the Plan, Bankruptcy Data says. On November 26, 2008, Delta Financial filed a form NTN 10-Q with the Securities and Exchange Commission, advising that it was unable to meet the deadline to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2008. "Due to the demands associated with the bankruptcy filing and related activities, and the [company's] limited personnel and resources, the [company] has been unable to complete the preparation of the Form 10-Q," the filing said. Delta Financial also noted that the employment of its Chief Financial Officer was terminated in April 2008. Delta Financial also has not filed its financial report on Form 10-K for the year ended December 31, 2007 and Form 10-Q's for the quarters ended March 31, 2008 and June 30, 2008. The company said it has been unable to provide a reasonable estimate of its third quarter 2008 results of operations due to its focus on its ongoing bankruptcy proceedings. The company said it cannot estimate what significant changes will be reflected in its third quarter 2008 results of operations compared to its third quarter 2007 results of operations. The company noted that its 2007 results of operations were prepared on the basis of the assumption that the company and its consolidated subsidiaries would continue to operate as a going concern, which was not necessarily the case as of September 30, 2008, in light of the of the bankruptcy proceedings. Founded in 1982, Delta Financial Corporation (NASDAQ: DFC) -- http://www.deltafinancial.com/-- is a Woodbury, New York-based specialty consumer finance company that originates, securitizes and sells non-conforming mortgage loans. The company filed a chapter 11 petition on December 17, 2007 (Bankr. D. Del. Lead Case No. 07-11880). On the same day, three affiliates filed separate chapter 11 petitions -- Delta Funding Corp., Renaissance Mortgage Acceptance Corp., and Renaissance R.E.I.T. Investment Corp. -- (Bankr. D. Del. Case Nos. 07-11881 to 07-11883). The Debtors selected Morrison & Foerster LLP as their general bankruptcy counsel and David B. Stratton, Esq. and James C. Carignan, Esq. at Pepper Hamilton LLP as their counsel. The Debtors hired AlixPartners LLP as their claims agent. The Official Committee of Unsecured Creditors retained Landis Rath & Cobb LLP as its Delaware counsel. The Debtors' amended consolidated quarterly financial condition as of Sept. 30, 2007, showed $7,223,528,000 in total assets and $7,108,232,000 in total liabilities. The Debtors' petition listed D.B. Structured Products Inc. as their largest unsecured creditor holding a $19,500,000 claim. DP FOODS: Files for Ch. 11 to Halt Burger King from Dropping Deals ------------------------------------------------------------------ According to Bloomberg News' Bill Rochelle, DP Foods Inc. filed for Chapter 11 in Santa Ana, California to stay Burger King from terminating their franchise agreements. Pursuant to Section 362 of the U.S. Bankruptcy Code, the filing of a bankruptcy case, under any chapter of the Bankruptcy Code, triggers an injunction against the continuance of any action by any creditor against the debtor or the debtor's property. Including affiliates not in bankruptcy, the chain has 110 Burger King restaurants in California, Washington and Oregon. The companies own the properties where 60 of the restaurants operate. DP Foods Inc. operates 26 fast-food Burger King Fastfood restaurants. It filed for Chapter 11 (Bankr. C.D. Calif.) on Dec. 9, 2008. DR HORTON: Fitch Downgrades Issuer Default Rating to 'BB' --------------------------------------------------------- Fitch Ratings has downgraded D.R. Horton, Inc.'s Issuer Default Rating and outstanding debt ratings: -- IDR to 'BB' from 'BB+'; -- Senior unsecured to 'BB' from 'BB+'; -- Unsecured bank credit facility to 'BB' from 'BB+'; -- Senior subordinated debt to 'B+' from 'BB-'. The Rating Outlook remains Negative. The downgrade reflects the current very difficult housing environment and Fitch's expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect negative trends in DHI's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios), erosion in tangible net worth from non-cash real estate charges and operating losses, which have led to untypically high leverage. (On a net debt basis, DHI's leverage is still within management's targeted range of below 45%.) Absent further significant non-cash real estate charges, DHI's leverage could also be lower in the next few quarters as the company pays down upcoming debt maturities. Furthermore, DHI's liquidity position provides a buffer and supports the new ratings. Fitch notes there is potential for lower operating cash flow generation in Fiscal 2009 as compared to fiscal 2008. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. DHI's ratings are based on the company's execution of its business model in the current housing correction, steady capital structure, geographic and product line diversity, and the company's above average growth during this past housing expansion. DHI had been an active consolidator in the homebuilding industry, which had kept debt levels a bit higher than its peers. But management also exhibited an ability to quickly and successfully integrate its many acquisitions. During fiscal 2002 DHI completed its largest acquisition in absolute size (Schuler Homes). However, DHI made no acquisitions in fiscal 2003 through fiscal 2008. It also appears that DHI may be less acquisitive in the future as it primarily focuses on harvesting the opportunities within its current and adjacent markets. DHI maintains a 4.7-year supply of lots (based on last 12 months deliveries), 79.2% of which are owned and the balance controlled through options. (The options share of total lots controlled is down sharply over the past three years as the company has written off substantial numbers of options.) The ratings also manifest the DHI's historic aggressive, yet controlled growth strategy and its relatively heavy speculative building activity (which had lessened late in the last up-cycle). DHI has historically built a significant number of its homes on a speculative basis (i.e. begun construction before an order was in hand). DHI successfully executed this strategy in the past. Nevertheless, Fitch was more comfortable with the more modest 'spec' targets of 2004 and 2005. At present 'spec' counts are high for DHI as with certain other builders because of higher than normal cancellation rates and market conditions that favor 'spec' building. DHI ended the Sept. 2008 quarter with $1.39 billion of cash on the balance sheet and $52.8 million of availability under its $1.65 billion unsecured revolving credit facility. Additionally, DHI expects to receive a tax refund of approximately $622 million in December 2008. In June 2008, DHI amended its revolving credit facility. As part of the amendment, the commitments under the revolver were reduced from $2.25 billion to $1.65 billion and the tangible net worth covenant was reset to $2 billion. As of Sept. 30, 2008, DHI was in compliance with all the covenants under its revolving credit facility. At Sept. 30, 2008, the company had a cushion of $631 million under the TNW covenant. The credit facility also has a maximum leverage covenant of 55%. DHI's leverage (for purposes of this covenant) at Sept. 30, 2008 was 49.6%. Management indicated that it has started preliminary discussions with its lead banks regarding the covenants under its credit facility. The revolving credit facility matures in December 2011. EASTMAN KODAK: Moody's Reviews Low-B Ratings for Likely Downgrade ----------------------------------------------------------------- Moody's Investors Service placed Eastman Kodak Company's ratings under review for possible downgrade. The rating action reflects Kodak's effective negative preannouncement whereby the company withdrew its guidance for the fourth quarter, citing the weak demand environment across its product portfolio. The company's most recent pre-announcement follows an earlier downward revision of revenue and profitability following its third quarter results. As a result of the deteriorating demand environment, Kodak's consumer digital segment, (about 30% of total revenue) is likely to see revenue declines in the fourth quarter, a period in which revenue typically shows seasonal strength. Combined with aggressive pricing pressure throughout its portfolio, Moody's expects that this segment will lose money in the fourth quarter. Given normal seasonality that will be exacerbated by the economic environment, Moody's expects that losses in this segment would likely occur in the first part of 2009. Driven by the stress in the credit markets and reduced demand by commercial printers, Kodak's commercial customers have found it more difficult to secure financing for new equipment purchases. This is expected to pressure results in the company's graphics communications business, which accounts for approximately 36% of total revenue. Kodak's traditional film business, which includes consumer film and photofinishing as well as feature film imaging, accounts for about 33% of revenue and is expected to remain profitable. The segment generated $157 million of operating profit in the first nine months of 2008. However, as this legacy business continues its secular decline, this segment's reduced profit contribution will place increasing pressure on its other businesses -- the intensely competitive consumer digital sector and the currently challenged graphics communications business. As part of its pre-announcement, the company said that its executives will not get salary increases in 2009 and that its 401(k) match for eligible employees is being temporarily suspended. In addition to these plans, the review will focus on what Moody's expects will be a more comprehensive plan by Kodak to contend with an extended slowdown in consumer and commercial spending. The company currently maintains good financial flexibility, with cash balances of $1.8 billion as of September 30, 2008, and access to a largely undrawn $1 billion secured revolving credit facility with ample headroom under its two financial covenants. Concurrently, Moody's affirmed the company's speculative grade liquidity rating of SGL-2. While Kodak has modest debt maturities of about $40 million over each of the next four years, the company also has an out of the money 3.375%, $575 million convertible bond that has a put date in October 2010. Moody's review will also consider the company's plans to address this potential put. Ratings under review for downgrade include: -- B1 Corporate Family Rating; -- B1 Probability of default rating; -- $1 billion 5 Year Secured Revolving Credit Facility, Ba1, LGD2, 18%; -- $500 million Senior Unsecured Notes due 2013, B2 LGD4, 68%; -- $3 million Senior Unsecured Notes due 2018, B2 LGD4, 68%; -- $10 million Senior Unsecured Notes due 2021, B2 LGD4, 68%; -- $575 million Senior Unsecured Convertible Notes due 2033, B2 LGD4, 68% Moody's most recent rating action for Kodak was on June 24, 2008 when Moody's commented that Kodak's B1 corporate family rating with a stable outlook would not be affected by the company's announcement that its Board of Directors has authorized a $1.0 billion stock repurchase program which the company planned to fund from a $581 million tax refund from the Internal Revenue Service associated with a completed audit of certain claims filed for tax years for the tax years 1993-1998. Eastman Kodak Company, headquartered in Rochester, New York, provides imaging technology products and services to the photographic, graphic arts commercial printing, consumer digital, and entertainment imaging market. Kodak reported $10.2 billion in revenue for the twelve months ended September 30, 2008. ECLIPSE AVIATION: Committee Objects to Sale to Insider ------------------------------------------------------ The official committee of unsecured creditors in Eclipse Aviation Corp.'s Chapter 11 cases objects to an accelerated sale of the business to ETIRC Aviation Sarl, the owner of 65% of the stock of Eclipse. According to Bloomberg News' Bill Rochelle, the Creditors Committee opposes the Jan. 6 deadline for bids, as the company did not solicit bids prior to the petition date. The committee also complains that the sale is to an insider and the amount being paid is "nearly impossible to value." The Committee requests: -- three more weeks for marketing of the business; -- valuation of ETIRC's bid so others can structure competing bids; -- deny a $5 million breakup fee for ETIRC which will hamper competitive bidding; and -- to deny the assignment to ETIRC of Eclipse rights to pursue causes of action. About Eclipse Aviation Albuquerque, New Mexico-based Eclipse Aviation Corporation -- http://www.eclipseaviation.com/-- makes six-passenger planes powered by two Pratt & Whitney turbofan engines. The company filed for Chapter 11 protection on Nov. 25, 2008 (Bankr. D. Delaware Case No. 08-13031). The company listed assets of $100 million to $500 million and debts of more than $1 billion. FEDERAL-MOGUL: Indian Government Okays $15MM Investment ------------------------------------------------------- India's Finance Minister Shri P. Chidambaram approved 32 proposals of foreign direct investment amounting to approximately $172,800,000, including Federal Mogul Corp.'s proposed investment of $15,300,000 for an autoparts plant in Chennai, India, the Indian Government said in a November 26, 2008, press release. Federal Mogul plans to build a new facility in Chennai, India, for the manufacture of friction components for Original Equipment and Aftermarket segments. The operation is scheduled to begin production of light vehicle brake and friction components, commercial vehicle and railway friction products by September 2009. A copy of the Indian Ministry's press release is available for free at http://bankrupt.com/misc/India_PR_ApprovingInvestment.pdf About Federal-Mogul Corporation Federal-Mogul Corporation -- http://www.federal-mogul.com/-- (OTCBB: FDMLQ) is a global supplier, serving the world's foremost original equipment manufacturers of automotive, light commercial, heavy-duty, agricultural, marine, rail, off-road and industrial vehicles, as well as the worldwide aftermarket. Founded in Detroit in 1899, the company is headquartered in Southfield, Michigan, and employs 45,000 people in 35 countries. Aside from the U.S., Federal-Mogul also has operations in other locations which includes, among others, Mexico, Malaysia, Australia, China, India, Japan, Korea, and Thailand. The Company filed for chapter 11 protection on Oct. 1, 2001 (Bankr. Del. Case No. 01-10582). Lawrence J. Nyhan Esq., James F. Conlan Esq., and Kevin T. Lantry Esq., at Sidley Austin Brown & Wood, and Laura Davis Jones Esq., at Pachulski, Stang, Ziehl & Jones, P.C., represent the Debtors in their restructuring efforts. When the Debtors filed for protection from their creditors, they listed $10.15 billion in assets and $8.86 billion in liabilities. Federal-Mogul Corp.'s U.K. affiliate, Turner & Newall, is based at Dudley Hill, Bradford. Peter D. Wolfson, Esq., at Sonnenschein Nath & Rosenthal; and Charlene D. Davis, Esq., Ashley B. Stitzer, Esq., and Eric M. Sutty, Esq., at The Bayard Firm represent the Official Committee of Unsecured Creditors. On March 7, 2003, the Debtors filed their Joint Chapter 11 Plan. They submitted a Disclosure Statement explaining that plan on April 21, 2003. They submitted several amendments and on June 6, 2004, the Bankruptcy Court approved the Third Amended Disclosure Statement for their Third Amended Plan. On July 28, 2004, the District Court approved the Disclosure Statement. The estimation hearing began on June 14, 2005. The Debtors submitted a Fourth Amended Plan and Disclosure Statement on Nov. 21, 2006, and the Bankruptcy Court approved that Disclosure Statement on Feb. 6, 2007. The Fourth Amended Plan was confirmed by the Bankruptcy Court on Nov. 8, 2007, and affirmed by the District Court on November 14. Federal-Mogul emerged from chapter 11 on Dec. 27, 2007. (Federal-Mogul Bankruptcy News, Issue No. 176; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) * * * As reported by the Troubled Company Reporter on Nov. 4, 2008, Standard & Poor's Ratings Services said it has revised its outlook on Federal-Mogul Corp. to negative from stable and affirmed its 'BB-' corporate credit rating on the company. Southfield, Michigan-based Federal-Mogul had total balance sheet debt of $3 billion as of Sept. 30, 2008. FIRST DATA: Posts $547MM Net Loss in Nine Months ended Sept. 30 --------------------------------------------------------------- First Data Corporation disclosed in a filing with the Securities and Exchange Commission that for three months ended Sept. 30, 2008, it has incurred a net loss of $164.4 million compared to a net loss of $56.7 million for the same period in the previous year. For nine months ended Sept. 30, 2008, the company reported a net loss of $546.7 million compared to a net loss of $460.8 million for the same period in the previous year. The company's source of liquidity during the first nine months of 2008 was principally cash generated from operating activities. The company believes its current level of cash and short-term financing capabilities along with future cash flows from operations are sufficient to meet the needs of its existing businesses. At Sept. 30, 2008, and Dec. 31, 2007, the company held $578.9 million and $606.5 million in cash and cash equivalents. Cash and cash equivalents held outside of the United States at Sept. 30, 2008, and Dec. 31, 2007, were $170.9 million and $203.4 million. The company is in compliance with all applicable covenants as of Sept. 30, 2008. At Sept. 30, 2008, the company's balance sheet showed total assets of $44.0 billion, total liabilities of $37.6 billion and stockholders' equity of $6.4 billion. A full-text copy of the 10-q filing is available for free at http://ResearchArchives.com/t/s?3626 About First Data Based in Greenwood Village, Colorado, First Data Corporation -- http://www.firstdata.com/-- is a global leader in electronic commerce and payment solutions for financial institutions, merchants, and other organizations worldwide. The company processes transaction data of all kinds, harnesses the power of that data and delivers innovations in secure infrastructure, intelligence and insight for its customers. With operations in 37 countries, First Data serves over 5.4 million merchant locations, 2,000 card issuers and their customers. * * * As reported in the Troubled Company Reporter on Nov. 21, 2008, Fitch Ratings has assigned these ratings: (i) $3 billion 10.55% senior unsecured notes with four-year mandatory PIK interest due 2015 'B-/RR6'; and (ii) $2.5 billion 11.25% senior subordinated notes due 2016 'CCC+/RR6'. The rating outlook has been revised to negative from stable. FOREST OIL: S&P Keeps B+ Sr. Unsec. Rating; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Ratings Services said that, following an industry review of oil and gas exploration and production companies, it revised the outlook to stable from positive on a number of speculative-grade companies while affirming the ratings. The review was prompted by S&P's recent revision of its oil and gas pricing assumptions in light of the rapid decline in hydrocarbon prices and S&P's expectation that lower prices will prevail for the near to medium term. S&P revised the outlook on Forest Oil Corp. (BB-) to stable from positive because S&P expects worsening credit metrics. At S&P's 2009 pricing assumptions, S&P expects debt to EBITDA to be roughly 3x, which well exceeds S&P's published upgrade trigger of 2x. In addition to the lower pricing assumptions, Forest's debt is higher than S&P previously expected because the company has not been able to consummate anticipated asset sales. Liquidity should remain adequate in 2009. S&P expects Forest to lower its capital budget from the 2008 level to be in line with internally generated cash flows. S&P revised the outlook on Whiting Petroleum Corp. (BB-) to stable from positive. Although the company has reported significant production growth throughout 2008, primarily in the Bakken oil formation in the northern U.S.), positive rating momentum has stalled because of the lower price environment. Furthermore, Whiting is vulnerable to further price declines because of its minimal hedge position in 2009. S&P does highlight, though, that the company's liquidity position of about $400 million as of Sept. 30, 2008, and its significant covenant cushion are adequate for the rating. On Clayton Williams Energy Inc. (B) S&P revised the outlook to stable from positive because of weaker credit measures, in light of S&P's revised crude oil and natural gas price assumptions. Although near-term liquidity remains adequate, the outlook revision reflects S&P's expectation that Clayton Williams will not be able to sustain its recent financial performance in the near term. S&P also expect Clayton's operating cash flows to weaken, given the company's "unhedged" position in 2009 and a relatively high cost structure. The revision of the outlook on Venoco Inc. (B) to stable from positive stems from falling commodity prices. This decline reduces S&P's confidence that credit measures will improve materially in the near term. The company is selling or monetizing (through a volumetric production payment) its interest in the Hastings complex to Denbury Resources Inc. (BB/Stable/--), which will likely result in debt repayment and increase availability under the revolving credit facility. However, the lower price environment will probably reduce the proceeds. Ratings List Ratings Affirmed, Outlook Revised Clayton Williams Energy Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sr unsecd B+ B+ Recovery 2 2 Forest Oil Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sr unsecd B+ B+ Recovery 5 5 Venoco Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sub debt B B Recovery 3 3 Whiting Petroleum Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sub debt BB- BB- Recovery 3 3 GENERAL GROWTH: Bankruptcy Will Have Little Effect on CMBS Deals ---------------------------------------------------------------- Material rating actions on Fitch-rated U.S. CMBS transactions with significant exposure to General Growth Properties assets are unlikely if GGP files for bankruptcy, according to Fitch Ratings, which recently downgraded General Growth Properties' Issuer Default Rating to 'C' earlier this week, indicating that a default is imminent. "The likelihood for significant rating actions across transactions with GGP property exposure is slim given their strong performance, moderate leverage, and the bankruptcy remote nature of CMBS borrowers," according to Managing Director Susan Merrick, "However, longer term declines in property performance are possible if necessary capital used for property maintenance and renovation is limited and property management operations are affected by corporate financial stress." Therefore, Fitch will continue to monitor these transactions closely. GGP has made significant use of leverage to fund growth, particularly secured debt, which has resulted in substantially all of its assets being encumbered. GGP-sponsored loans are included in 64 CMBS transactions rated by Fitch accounting for approximately 1.4% of the total Fitch rated universe. Given the current liquidity stress in the CMBS market, GGP has had considerable difficulty recently in accessing the secured debt markets. GGP has almost $1 billion of secured and unsecured debt maturing by the end of 2008 and an additional $3.1 billion maturing in 2009. In the event of a GGP corporate bankruptcy, CMBS bondholders are protected by the bankruptcy-remote nature of CMBS borrowers. "A default on GGP corporate loans will not trigger a default under CMBS loan documents," said Mr. Merrick. The borrowing entities are typically structured as single purpose entities (SPEs), which isolate the borrower from the bankruptcy of a parent or related entity. This is achieved by limiting the SPEs' role to owning and maintaining the property and restricting it from owning other assets or incurring any additional debt. Bondholders are further protected by the master servicer's ability to advance principal and interest payments if they are deemed recoverable, should debt service payments not be made. "A key factor limiting term default risk of CMBS loans in the event of a GGP bankruptcy is the strength of the current performance of the properties," said Managing Director Eric Rothfeld. "More than 75% of GGP loans rated by Fitch have actual debt service coverage ratios (DSCRs) greater than 1.50 times (x) and 67% are greater than 2.0x." Fitch reviewed in detail all 34 Fitch rated CMBS transactions with GGP exposures greater than 5% of the remaining deal balance and applied conservative loss severities based on property DSCR. Fitch found that even for the deals with the most exposure to GGP loans with relatively low DSCRs (below 1.50x), estimated losses would generally only impact 'B' rated bonds, and the bonds above 'BB' would not likely warrant rating actions. These transactions include J.P. Morgan 2002-CIBC4, J.P. Morgan 2005-LDP4, Morgan Stanley 2005-IQ9, and Merrill Lynch Mortgage Trust 2006-C1. Refinance risk remains a material issue given the limited liquidity in the financial markets and weaknesses in the retail sector. However, only eight GGP loans in Fitch-rated CMBS transactions have a final maturity in 2009 and each has a current DSCR greater than 1.60x which provides for some cushion in refinancing the loan in an environment with more conservative lending standards. From a longer term perspective, Fitch believes that a GGP bankruptcy filing could have negative implications for property performance and operations. GGP malls are generally dominant malls in their region. If a bankruptcy were to occur, funds necessary for the ongoing capital expenditures utilized for renovation and leasing costs may be limited to excess cash flow from the property or DIP financing in a Chapter 11 reorganization. GGP-sponsored CMBS loans do not typically have funded reserves for these expenses. Further, national leasing relationships developed by GGP will be less productive in the event of a bankruptcy, potentially increasing property vacancy. Finally, property management may suffer as corporate level stress will likely affect the ability to attract and retain the talented property managers that have historically operated GGP's mall portfolio; bankruptcy could also delay termination of management contracts if necessary. CMBS loans secured by GGP properties will not be impacted in the near term in the event of a corporate-level bankruptcy. The properties generally continue to maintain strong performance as dominant regional malls located throughout the United States. However, in light of the longer term implications of a GGP bankruptcy, Fitch will continue to monitor CMBS transactions with large exposures to these malls, and will take rating actions based on property performance accordingly. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. GENERAL MOTORS: Default Risk Hinges on Government Action, S&P Says ------------------------------------------------------------------ Standard & Poor's Ratings Services said that, in light of the U.S. Senate's rejection last night of an emergency loan package for General Motors Corp. and Chrysler LLC, the risk of default by one or both of these companies over the next few months remains very high. The Bush Administration said it will consider using funds earmarked for the financial industry stabilization package to support the U.S. automakers' near-term liquidity needs. The U.S. Treasury said it stands ready to prevent an imminent failure of the automakers. However, the Treasury has not yet indicated how the automakers can access the funding provided through the Troubled Asset Relief Program, or TARP. It is also uncertain where TARP loans would stand in the automaker capital structure. Ford Motor Co. is not currently seeking federal loans, primarily because it has a large unused bank facility. The current ratings on all three automakers already reflect their high default risk and are therefore not changed by the U.S. Senate vote. S&P applies ratings in the 'CCC' category to companies that are highly likely to default on a debt payment and that depend on multiple factors beyond their control to meet their financial commitments. The 'CC' rating on GM reflects these risks, as well as the company's stated intention that it will seek to reduce its current debt burden by more than half as it attempts to reduce cash outflows and win support for the U.S. government-backed loans. S&P believes the most likely scenario is that GM will offer to exchange some or all of its outstanding debt for equity or new debt at a steep discount to face value. Given GM's weakening liquidity position, S&P considers such an offer to be a distressed exchange and, as such, is tantamount to a default. In S&P's view, the catalyst for a GM or Chrysler bankruptcy in the very near term is unchanged: liquidity dropping below the minimum levels needed to operate their capital-intensive vehicle manufacturing businesses. The automakers ordinarily make substantial payments to their suppliers early each month, and S&P believes the several billion dollars in outlays expected during the first few days of January 2009 could use up a substantial portion of both companies' respective cash balances, unless U.S. government support of some kind is forthcoming or the suppliers defer these payments. Consumer demand in the U.S. and other key markets has only worsened since these companies first said they might not have enough cash to support operations into early next year. In addition, S&P believes concerns about bankruptcies have added to the declines in GM's and Chrysler's sales and therefore heightened their cash use. In addition, S&P remains concerned about the spillover effects of an automaker failure on the North American parts suppliers. Many important suppliers sell parts to more than one automaker, and as S&P has stated previously, if GM or Chrysler should file for bankruptcy, withhold payments to suppliers, or be forced to halt operations, the repercussions to the suppliers would be dramatic. S&P placed 15 suppliers on CreditWatch with negative implications on Nov. 13, 2008, as a result of their significant exposure to the Michigan-based automakers. Ford's liquidity remains materially better than that of the other two Michigan-based automakers. However, if GM or Chrysler were to file for bankruptcy, Ford may have to use its liquidity to keep its supply base intact. S&P's recovery ratings on U.S. automaker debt are based on the assumption of a bankruptcy filing, multi-year reorganization, and eventual emergence. These ratings are not affected by the developments. Expected recovery prospects for secured and unsecured debtholders vary by automaker, largely reflecting the company-specific mix of secured and unsecured debt in the capital structure rather than vastly different fundamentals for each company. Ratings List General Motors Corp. Corporate Credit Rating CC/Negative/-- Senior Secured CCC Recovery Rating 1 Senior Unsecured CC Recovery Rating 4 Ford Motor Co. Corporate Credit Rating CCC+/Negative/-- Senior Secured CCC+ Recovery Rating 3 Senior Unsecured CCC- Recovery Rating 6 Chrysler LLC Corporate Credit Rating CCC+/Negative/-- Senior Secured $7 bil. first-lien term bank ln due 2013 B Recovery Rating 1 $2.0 bil. second-lien bank ln due 2014 CCC+ Recovery Rating 4 GENERAL MOTORS: Lets GMAC Defer $1.5B Payment Until Dec. 30 ----------------------------------------------------------- GMAC LLC disclosed in a regulatory filing with the Securities and Exchange Commission that as a result of the change in payment terms, GMAC will be able to defer payment until Dec. 30, 2008, of up to $1.5 billion in cash due to General Motors Corporation. During the shipping period GM will have a security interest in the financed vehicles. On Dec. 9, 2008, GM and GMAC LLC agreed on a temporary basis to adjust GMAC's terms for making advance payments to GM for wholesale financing of vehicles sold to GM dealers. GM typically has an increase in its inventory levels in advance of the year-end shut down and this adjustment will help finance purchases of this inventory. Ordinarily, GMAC pays GM the invoice amount for a vehicle shipped by GM to a GMAC financed dealer on the first business day after the shipping date. Beginning on Dec. 9, 2008, GMAC will be obligated to pay GM the invoice amount when the amounts are due from dealers. As reported by the Troubled Company Reporter on Dec. 11, auto lender GMAC and its home mortgage-making subsidiary Residential Capital LLC are negotiating with bondholders over changes in the exchange offers announced in November. Less than 25% of the debt was tendered, according to GMAC. The company said 75% is required to complete the transaction and enable becoming a bank holding company. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. For three months ended Sept. 30, 2008, the company reported net loss of $2.5 billion compared to net loss of $1.5 billion for the same period in the previous year. For nine months ended Sept. 30, 2008, the company incurred net loss of $5.5 billion compared to $1.6 billion for the same period in the previous year. At Sept. 30, 2008, the company's balance sheet showed total assets of $211.3 billion, total liabilities of $202.0 billion and members' equity of about $9.3 billion. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. As reported in the Troubled Company Reporter on Nov. 10, 2008, General Motors Corporation's balance sheet at Sept. 30, 2008, showed total assets of $110.425 billion, total liabilities of $170.3 billion, resulting in a stockholders' deficit of $59.9 billion. GMAC LLC: Extends Notes Offerings to December 26 ------------------------------------------------ GMAC Financial Services amended and extended its separate private exchange offers and cash tender offers to purchase and exchange certain of its and its subsidiaries' and Residential Capital, LLC's outstanding notes in order to reflect an agreement in principle reached with representatives of a substantial portion of the outstanding notes. This is GMAC Financial's fourth extension of the early delivery time to provide investors the opportunity to consider the GMAC and ResCap offers. GMAC said that the amount of notes covered by the agreement in principle on the material terms of the offer represents substantial progress toward attaining the estimated overall participation that would be required to satisfy the condition for a minimum amount of regulatory capital in connection with GMAC's application to become a bank holding company. However, significant additional participation will also be required. In order for the condition to be satisfied, the estimated overall participation in the offers would be required to be approximately 75% on a pro rata basis. The Federal Reserve has informed GMAC that if GMAC is unable to meet these capital requirements, it will not approve GMAC's application to become a bank holding company. GMAC disclosed that it has extended the early delivery time with respect to the offers to 5:00 p.m., New York City time, on Dec. 16, 2008, and extended the expiration date of the offers to 11:59 p.m., New York City time, on Dec. 26, 2008. The withdrawal deadline with respect to the offers has not been extended. The amendments include an increase in the annual dividend rate to 9% (to be reduced to 7% after GMAC shall have raised at least $2 billion of new Tier 1 capital, $750 million of which is to be contributed by GMAC's existing shareholders) and the addition of certain covenants relating to the new guaranteed notes, including restrictions on liens, subsidiary guarantees and asset sales. To date, approximately $6.8 billion in aggregate principal amount or 24% of the outstanding GMAC old notes have been tendered in the GMAC offers and approximately $2.4 billion in aggregate principal amount or 25% of the outstanding ResCap old notes have been tendered in the ResCap offers. These results do not include the notes covered by the agreement in principle. GMAC intends to distribute supplements to the confidential offering memoranda distributed with respect to the GMAC and ResCap offers, containing the complete final amendments to the terms and conditions of the GMAC and ResCap offers. Global Bondholder Services Corporation, the information agent for the offers, is available to assist investors with questions regarding the tender and exchange process or other logistical issues, at (866) 794-2200 (U.S. Toll-free). Documents relating to the offers will only be distributed to holders of the old notes who complete and return a letter of eligibility confirming that they are within the category of eligible investors for this private offer. Noteholders who desire to obtain a copy of the eligibility letter should also contact Global Bondholder Services Corporation. About ResCap Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. For three months ended Sept. 30, 2008, the company reported net loss of $2.5 billion compared to net loss of $1.5 billion for the same period in the previous year. For nine months ended Sept. 30, 2008, the company incurred net loss of $5.5 billion compared to $1.6 billion for the same period in the previous year. At Sept. 30, 2008, the company's balance sheet showed total assets of $211.3 billion, total liabilities of $202.0 billion and members' equity of about $9.3 billion. * * * As reported in the Troubled Company Reporter on Dec. 15, 2008, Standard & Poor's Ratings Services said that its ratings on GMAC LLC (CC/Watch Neg/C) and its 100% owned subsidiary, Residential Capital LLC (CC/Watch Neg/C) are not affected by GMAC's announcement that it extended the early delivery time with respect to separate private exchange offers and cash tender offers to purchase or exchange certain of its and its subsidiaries' and Residential Capital's outstanding notes to provide investors with a final opportunity to consider the GMAC and Residential Capital LLC offers. GMAC LLC: Gets Dec. 30 Extension of $1.5-Bil. Owed to GM -------------------------------------------------------- GMAC LLC disclosed in a regulatory filing with the Securities and Exchange Commission that as a result of the change in payment terms, GMAC will be able to defer payment until Dec. 30, 2008, of up to $1.5 billion in cash due to General Motors Corporation. During the shipping period GM will have a security interest in the financed vehicles. On Dec. 9, 2008, GM and GMAC LLC agreed on a temporary basis to adjust GMAC's terms for making advance payments to GM for wholesale financing of vehicles sold to GM dealers. GM typically has an increase in its inventory levels in advance of the year-end shut down and this adjustment will help finance purchases of this inventory. Ordinarily, GMAC pays GM the invoice amount for a vehicle shipped by GM to a GMAC financed dealer on the first business day after the shipping date. Beginning on Dec. 9, 2008, GMAC will be obligated to pay GM the invoice amount when the amounts are due from dealers. As reported by the Troubled Company Reporter on Dec. 11, auto lender GMAC and its home mortgage-making subsidiary Residential Capital LLC are negotiating with bondholders over changes in the exchange offers announced in November. Less than 25% of the debt was tendered, according to GMAC. The company said 75% is required to complete the transaction and enable becoming a bank holding company. About General Motors Headquartered in Detroit, Michigan, General Motors Corp. (NYSE: GM) -- http://www.gm.com/-- was founded in 1908. GM employs about 266,000 people around the world and manufactures cars and trucks in 35 countries. In 2007, nearly 9.37 million GM cars and trucks were sold globally under the following brands: Buick, Cadillac, Chevrolet, GMC, GM Daewoo, Holden, HUMMER, Opel, Pontiac, Saab, Saturn, Vauxhall and Wuling. GM's OnStar subsidiary is the industry leader in vehicle safety, security and information services. General Motors Latin America, Africa and Middle East, with headquarters in Miramar, Florida, is one of GM's four regional business units. GM LAAM employs approximately 37,000 people in 18 countries and has manufacturing facilities in Argentina, Brazil, Colombia, Ecuador, Egypt, Kenya, South Africa and Venezuela. GM LAAM markets vehicles under the Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Opel, Saab and Suzuki brands. As reported in the Troubled Company Reporter on Nov. 10, 2008, General Motors Corporation's balance sheet at Sept. 30, 2008, showed total assets of $110.425 billion, total liabilities of $170.3 billion, resulting in a stockholders' deficit of $59.9 billion. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. For three months ended Sept. 30, 2008, the company reported net loss of $2.5 billion compared to net loss of $1.5 billion for the same period in the previous year. For nine months ended Sept. 30, 2008, the company incurred net loss of $5.5 billion compared to $1.6 billion for the same period in the previous year. At Sept. 30, 2008, the company's balance sheet showed total assets of $211.3 billion, total liabilities of $202.0 billion and members' equity of about $9.3 billion. * * * As reported in the Troubled Company Reporter on Dec. 15, 2008, Standard & Poor's Ratings Services said that its ratings on GMAC LLC (CC/Watch Neg/C) and its 100% owned subsidiary, Residential Capital LLC (CC/Watch Neg/C) are not affected by GMAC's announcement that it extended the early delivery time with respect to separate private exchange offers and cash tender offers to purchase or exchange certain of its and its subsidiaries' and Residential Capital's outstanding notes to provide investors with a final opportunity to consider the GMAC and Residential Capital LLC offers. GMAC LLC: Tries to Lure Potential Investors to Raise Capital ------------------------------------------------------------ GMAC LLC is negotiating with potential investors to help it raise $1.25 billion in fresh capital needed for the Federal Reserve to start backstopping the company's finances, Aparajita Saha-Bubna at The Wall Street Journal reports, citing people familiar with the matter. As reported by the Troubled Company Reporter on Dec. 11, 2008, GMAC Financial Services threatened bondholders that it would abandon its effort to become a bank holding company if it doesn't get the required support from them. GMAC failed to lure enough bondholders to $38 billion debt exchange offer and so the company failed to raise enough capital for it to become a bank holding company. GMAC must raise $2 billion of new capital and have at least $30 billion in total regulatory capital. By becoming a bank, GMAC will be able to access the Treasury's $700 billion rescue fund. It will also allow GMAC to sell bonds backed by the Federal Deposit Insurance Corp., giving it new funding. GMAC was shut out of the public market for bonds backed by auto loans for the past six months. GMAC asked bondholders in November to tender their securities for at least 55 cents in cash or a combination of new notes and preferred stock, which would count as regulatory capital. GMAC's debt exchange offer is extended to GMAC and Residential Capital LLC investors. GMAC extended for the third time the delivery deadline for debt holders to Dec. 12. WSJ relates that lenders agreed to amended terms of the $38 billion restructuring of debt obligations threatening to overwhelm GMAC. WSJ quoted GMAC spokesperson Gina Proia as saying, "But we are working diligently to raise the remaining new capital needed." According to WSJ, GMAC has to raise $2 billion from existing shareholders or new investors to meet bank holding company rules. GMAC said in a statement that shareholders are bringing in over $750 million of the $2 billion sum. WSJ relates that the shareholders are likely to refuse to bring in more. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. As reported in the Troubled Company Reporter on Nov. 13, 2008, Fitch Ratings has downgraded GMAC LLC's issuer default rating and senior unsecured debt: (i) IDR to 'CCC' from 'B+'; and (ii) senior unsecured debt to 'CC' from 'B+'. GRAHAM ENTERTAINMENT: Voluntary Chapter 11 Case Summary ------------------------------------------------------- Debtor: Graham Entertainment Complex, Inc. dba Graham Central Station 6999 E. Business I-10 Odessa, TX 79762-5483 Bankruptcy Case No.: 08-70233 Chapter 11 Petition Date: December 5, 2008 Court: Western District of Texas (Midland) Judge: Ronald B. King Debtor's Counsel: Wiley France James, III, Esq. zpal@jghpc.com James & Haugland, P.C. P.O. Box 1770 El Paso, TX 79949-1770 Tel: (915) 532-3911 Fax: (915) 541-6440 Estimated Assets: below $50,000 Estimated Debts: $1,000,000 to $10,000,000 The Debtor did not file a list of 20 largest unsecured creditors. The petition was signed by Federico Gonzales, president of the company. GRANT FOREST: S&P Junks Corporate Credit Rating; Outlook Negative ----------------------------------------------------------------- Standard & Poor's Ratings Services said it lowered the long-term corporate credit rating on Toronto-based Grant Forest Products Inc. to 'CCC+' from 'B-'. The outlook is negative. "The downgrade stems from our expectation that Grant will continue to generate very weak profitability and cash flow in the next several quarters, potentially causing the company's liquidity to deteriorate," said S&P's credit analyst Donald Marleau. At the current oriented strandboard price of US$165/msf, Grant is generating negative EBITDA, which S&P believes will result in a deterioration of the company's large cash balance. Furthermore, the prospects for a sustained improvement are uncertain amid the seasonal slowdown in construction and a depressed North American new home construction market. The rating on Grant reflects what S&P see as its high debt leverage, volatile earnings and cash flow, and narrow product focus in OSB. These factors are partially offset in S&P's view by the company's modern cost-efficient facilities and good fiber integration. The company's two new OSB mills in Allendale and Clarendon, South Carolina, will improve operating diversity and mitigate foreign currency exposure because about 50% of OSB production will be in the U.S. Grant's cost profile will also improve when both of the new mills are operating at full design capacity. Although the closure of high-cost capacity in the current downturn has flattened the industry's cost curve, Grant's new facilities will be among the lowest cost OSB mills in the industry. Grant is a leading manufacturer of OSB, which is a plywood substitute used primarily in residential construction and remodeling. Although the company has increased its production capacity by 47% with the addition of the two new mills, only the Allendale facility is operating at full capacity, while the Clarendon mill has delayed its startup amid the industry slump. The expansions will make Grant the fourth-largest OSB producer in North America with 3.6 billion square feet of capacity. The company also operates two mills in northern Ontario and has a 50% ownership interest with Ainsworth Lumber Co. Ltd. (B-/Negative/--) in the Footner mill in High Level, Alta. The company's Timmins mill in northern Ontario has been shut down because of a labor dispute, and production at the High Level facility was curtailed indefinitely in November 2007 due to weak market conditions. The negative outlook reflects S&P's view that, although Grant has a large cash balance, weak OSB prices in the next several months could result in an ongoing operating cash burn, increasing pressure on the company's liquidity. S&P could lower the rating if Grant's profitability and cash flow remain weak enough that the company risks breaching covenants in its credit agreement within the next year, which would likely occur if OSB prices remained below US$185/msf for several quarters. Alternatively, S&P could revise the outlook to stable or raise the rating if OSB prices improve to a level where Grant is able to sustain positive free operating cash flow. GREENBRIER COMPANIES: Moody's Affirms 'B1' Corporate Family Rating ------------------------------------------------------------------ Moody's Investors Service has affirmed the B1 Corporate Family Rating of The Greenbrier Companies, but has changed outlook to negative from stable. At the same time, Moody's has lowered the ratings of Greenbrier's unsecured notes to B3 from B2, reflecting the increasing levels of senior secured debt in the capital structure and lower estimated recovery of these notes in the event of default. Greenbrier's B1 corporate family rating reflects the company's high debt levels resulting from recent acquisitions, along with margin and coverage levels that are weaker than other rated rail car manufacturers and lessor companies. Operating margins have remained below historical levels in 2008 -- 5.7% for the year ending August 2008 -- and are expected to remain below the 9-12% range typical of Ba-rated companies in this sector. Manufacturing margins are of particular concern (less than 2% in FY 2008), as recent profitability in this area has been negatively affected by operating losses associated with Greenbrier's Canadian Facility (now closed), as well as by start-up costs relating to its Mexican JV operations. However, Greenbrier benefits from higher margins contributed by the car repair and refurbishment segment (over 40% of total revenue), which partially offsets the effects of weakness in the rail car OE and leasing businesses. Also, the cessation of operations at Greenbrier's troubled Canadian manufacturing facility eliminates a long-running drag on profits. The ratings outlook was changed to negative to reflect Moody's expectations that operating margins, manufacturing in particular, will remain relatively weak through the industry downcycle. This will likely constrain the company from improving credit metrics materially over the near term, and will limit the degree to which the company can repay debt over this time. Moody's expects that railcar demand, a key driver to revenue growth in the company's core manufacturing and leasing segments, will remain soft through 2009, reflecting the depth and duration of the current economic downturn in North America. The rating could be pressured down if Greenbrier loses a key customer or supplier and is unable to quickly replace that revenue or supply, or if the company undertakes any further material acquisitions, particularly if the investment is outside of the company's existing business model. If EBIT to Interest falls below 1.5 times, or if the company is unable to generate meaningful free cash flow to reduce debt as the railcar cycle turns down the rating could also be pressured downward. The rating or the outlook could be stabilized if Greenbrier is able to sustain a consolidated operating margin above 6% over the cycle, particularly if manufacturing margins can be improved. The ability to restore EBIT to Interest to the 2.0 times range and debt to EBITDA less than 5 times would also be important factors to stabilizing the outlook. Greenbrier's senior unsecured notes' ratings were lowered to B3 from B2 as the result of changes in the company's debt structure over the past year, whereby the company has added a significant amount of senior secured debt in the form of secured notes related to railcar leasing assets. The incremental senior debt reduces the estimated recovery that these notes would receive in the event of default. Per Moody's Loss Given Default Methodology, this increased level of implied loss results in an increased notching, from one notch to two, below the Corporate Family Rating. Downgrades: Issuer: Greenbrier Companies, Inc. (The) -- Senior Unsecured Conv./Exch. Bond/Debenture, Downgraded to B3 (LGD5, 78%) from B2 -- Senior Unsecured Regular Bond/Debenture, Downgraded to B3 (LGD5, 78%) from B2 Outlook Actions: Issuer: Greenbrier Companies, Inc. (The) -- Outlook, Changed To Negative From Stable The last rating action on Greenbrier was a downgrade of the company's Corporate Family Rating to B1 on March 28, 2007. The Greenbrier Companies manufacture railroad freight cars, with particular strength as the leading producer of intermodal flat cars, and also repairs railroad freight cars and provide wheels and various car parts. Greenbrier owns a modest-sized portfolio of 9,000 railcars, which it leases to third parties, and provides a range of management services for approximately 138,000 other railcars. GREENSTONE RESOURCES: Creditors Accept Plan of Arrangement ---------------------------------------------------------- Shimmerman Penn Title & Associates Inc., trustee of the bankruptcy estate of Greenstone Resources Ltd., confirmed that: a) at a meeting of the company's creditors held on Jan. 25, 2007, to consider the amended consolidated plan of arrangement, the required majority of the company's creditors present and voting at the meeting accepted the plan of arrangement; and b) on Jan. 30, 2007, the Ontario Superior Court of Justice made an order in connection with the reorganization of the company pursuant to the Companies' Creditors Arrangement Act and Canada Business Corporations Act. The Trustee has advised that the implementation of the plan of arrangement is subject to various conditions, including obtaining certain regulatory approvals. One required regulatory approval involves the lifting by applicable securities regulatory authorities of applicable cease trade orders, which continue to remain in place. Headquartered in Toronto, Ontario, Greenstone Resources Ltd. (Nasdaq:GRERF.PK) owns gold operations in Honduras and Nicaragua. HANCOCK FABRICS: Posts $70.6 Million Net Sales for 3rd Qtr. 2008 ---------------------------------------------------------------- Hancock Fabrics Inc. said net sales for the third quarter rose 1.3% to $70.6 million from $69.7 million last year, with same- store sales increasing 2.1%. Sales for the year-to-date period increased 0.7% to $198.2 million for the nine months ended Nov. 1, 2008, from $196.9 million for the corresponding period of the prior year. Same-store sales increased 2.8% for the year-to-date period. The 2.1% increase in same-store sales for the quarter was primarily the result of an increase in the number of store transactions. For the year-to-date period, the 2.8% increase in same store sales was primarily due to increases in average transactions and increases in the number of customer transactions. The company's gross margin rate decreased 460 basis points to 40.0% in the third quarter and 260 basis points on a year-to-date basis to 41.4%. Excluding the impact of the LIFO inventory reserve, gross margin rate decreased 200 basis points to 43.0% in the third quarter but increased 30 basis points on a year-to-date basis to 43.7%. The decline in the gross margin rate for the third quarter was driven primarily by an increase in distribution costs partly offset by a 100 basis point increase in merchandise margin. The year-to-date gross margin rate increase was primarily driven by an increase in merchandise margin. This increase in merchandise margin was principally due to a reduction in clearance and promotional programs as well as benefits from ongoing product sourcing initiatives. The net loss for the quarter ended Nov. 1, 2008, of $2.5 million compared to a $6.1 million loss for the quarter ended Nov. 3, 2007, both inclusive of bankruptcy related costs. The year-to- date net loss was $20.9 million for the nine months ended Nov. 1, 2008, compared to a net loss of $20.7 million for the corresponding period of the prior year, both inclusive of bankruptcy related costs. Jane Aggers, Chief Executive Officer and President, said, "We are encouraged with our progress this year despite the current economic climate. Our team has been able to drive positive comparative growth by increasing transaction counts and improving the average transaction total. In addition to driving the top line, we have been able to expand our margin rates by reducing clearance and promotional programs, while improving our product sourcing. We have also concentrated on lowering our selling, general, and administrative costs. As we move forward into the fourth quarter, we will maintain focus in these same areas while attempting to maintain the top line in this challenging environment." EBITDA on a FIFO basis from continuing operations excluding reorganization expenses for the third quarter of fiscal 2008 was $2.1 million versus $0.3 million for the same period last year. Year-to-date fiscal 2008 was a loss of $0.3 million versus a profit of $0.8 million in the first nine months of fiscal 2007. This increase in the current quarter is primarily driven by reductions in selling, general and administrative expenses. The slight deterioration in the year-to-date amount is the result of fiscal 2007 selling, general and administrative expenses including certain credits related to the reduction in force driven by the store liquidation process. Third quarter reported debt levels totaled $56.2 million, net of bond issuance discount of $11.1 million. During the quarter, the Company generated over $11.0 million of cash flow from operations. Approximately $2.0 million of this cash flow was utilized for capital spending. The remainder was put towards the revolver balance. At the end of the third quarter, the Company had over $32 million of availability under its revolving credit facility compared to $21 million availability under its credit facility as of the end of the second quarter. As of Dec. 1, 2008, availability under the revolving credit facility increased to approximately $37 million. During the first nine months of fiscal 2008, the Company opened one new store, relocated four stores and remodeled 63 stores. A full-text copy of Hancock Fabrics' Financial Results for Third Quarter of 2008 is available for free at: http://ResearchArchives.com/t/s?363a About Hancock Fabrics Headquartered in Baldwyn, Mississippi, Hancock Fabrics Inc. (OTC: HKFIQ) -- http://www.hancockfabrics.com/-- is a specialty retailer of a wide selection of fashion and home decorating textiles, sewing accessories, needlecraft supplies and sewing machines. Hancock Fabrics is one of the largest fabric retailers in the United States, currently operating approximately 400 retail stores in approximately 40 states. The company employs approximately 7,500 people on a full-time and part-time basis. Most of the company's employees work in its retail stores, or in field management to support its retail stores. The company and six of its debtor-affiliates filed for chapter 11 protection on March 21, 2007 (Bankr. D. Del. Lead Case No. 07-10353). Robert J. Dehney, Esq., at Morris, Nichols, Arsht & Tunnell, represents the Debtors. The U.S. Trustee for Region 3 appointed five creditors to serve on an Official Committee of Unsecured Creditors. The Court confirmed the Debtors' joint consolidated plan of reorganization on July 22, 2008. HAWAIIAN TELCOM: Wants Chapter 11 Case Moved to Hawaii ------------------------------------------------------ Hawaiian Telcom Communications Inc. will ask the U.S. Bankruptcy Court for the District of Delaware to allow the transfer of its Chapter 11 cases to the Bankruptcy Court in Hawaii, Honolulu. The Debtor has reached a stipulation with the state of Hawaii regarding the transfer. The company filed its Chapter 11 cases in Delaware as Hawaiian Telcom is incorporated under Delaware law, and the Delaware Court is in close proximity to its advisors involved in the case which would assist in mitigating costs to the company. Following discussions with various constituents, Hawaiian Telcom determined that it is appropriate to move the Chapter 11 cases to the local bankruptcy court. The company considers that the move will be a positive step in the restructuring process. The company expects that the hearing on the motion to approve the stipulation will be scheduled for Dec. 23, 2008, in Wilmington, Delaware. About Hawaiian Telecom Based in Honolulu, Hawaii, Hawaiian Telecom Communications, Inc. - - http://www.hawaiiantel.com/-- operates a telecommunications company, which offers an array of telecommunications products and services including local and long distance service, high-speed Internet, wireless services, and print directory and Internet directory services. The company and five of its affiliates filed for Chapter 11 protection on Dec. 1, 2008 (Bankr. D. Del. Lead Case No. 08-13086). Richard M. Cieri, Esq., Paul M. Basta, Esq., and Christopher J. Marcus, Esq., at Kirkland & Ellis LLP, represent the Debtors in their restructuring efforts. The Debtors proposed Lazard Freres & Co. LLC as investment banker; Zolfo Cooper Management LLC as business advisor; Deloitte & Touche LLP as independent auditors; and Kurztman Carson Consultants LLC as notice and claims agent. When the Debtors filed for protection from their creditors, they listed total assets of $1,352,000,000 and total debts of $1,269,000,000 as of Sept. 30, 2008. HEALTHSOUTH CORP: 3 Executives Acquire 34,900 Shares ---------------------------------------------------- Edward L. Shaw, Jr., director of HealthSouth Corp., disclosed in a Form 4 filing with the Securities and Exchange Commission that he acquired 5,000 shares of the company's common stock on Nov. 13, 2008. He acquired the shares at prices of $10.82 to $10.88 apiece, and owned a total of 26,653 shares following the purchases. John L. Workman, the company chief financial officer, also disclosed the purchase of 5,000 shares of common stock as of Nov. 10, 2008. He acquired the shares at $11.74 to $11.78 apiece, and owned an aggregate 96,705 shares following the purchases. In a separate filing, Jay Grinney, chief executive officer of the company, disclosed that he may be deemed to directly own 392,653 shares of the company's common stock after the acquisition of 24,900 shares of common stock on Nov. 10, 2008. The company has 88,022,103 shares of common stock outstanding, net of treasury shares, as of Oct. 31, 2008. About HealthSouth Corp. Headquartered in Birmingham, Alabama, HealthSouth Corp. (NYSE: HLS) -- http://www.healthsouth.com/-- provides inpatient rehabilitation services. Operating in 26 states across the country and in Puerto Rico, HealthSouth serves more than 250,000 patients annually through its network of inpatient rehabilitation hospitals, long-term acute care hospitals, outpatient rehabilitation satellites, and home health agencies. At Sept. 30, 2008, the company's balance sheet showed total assets of $1.9 billion and total liabilities of $3.3 billion, resulting in a shareholders' deficit of about $1.4 billion. For three months ended Sept. 30, 2008, the company's net income was $6.6 million compared with net income of $287.6 million for the same period in the previous year. For nine months ended Sept. 30, 2008, the company reported net income of $70.5 million compared with net income of $699.2 million for the same period in the previous year. In total and through October 2008, the company has reduced its total debt outstanding by approximately $208 million since Dec. 31, 2007. Total debt outstanding approximated $1.8 billion as of Oct. 31, 2008. HEALTHSOUTH CORP: Executives Buy Shares of Stock, Disclose Stake ---------------------------------------------------------------- John E. Maupin, Jr. DDS, a director of Healthsouth Corporation, disclosed in a regulatory filing with the Securities and Exchange Commission that he may be deemed to beneficially own 15,898 shares of the company's common stock after the Nov. 26, 2006, acquisition of 1,000 shares of common stock at $10.0488 per share. In a separate filing, Edward A. Blechschmidt, a director of the company, disclosed that he acquired 4,000 shares of the company's common stock on Nov. 20, 2008. He acquired the shares at $8.99 to $9.52 apiece. After the acquisitions, Mr. Blechschmidt may be deemed to directly own 21,187 shares. John P. Whittington, general counsel & secretary of the company, also disclosed that he acquired 9,000 shares of the company's common stock on Nov. 12, 2008. After the acquisitions, Mr. Whittington may be deemed to directly own 52,857 shares. Edmund Fay, senior vice president and treasurer, also disclosed that he may be deemed to beneficially own 8,750 shares after the Nov. 12, 2008, purchase of 3,250 shares of common stock at $10.99 per share. The company has 88,022,103 shares of common stock outstanding, net of treasury shares, as of Oct. 31, 2008. About HealthSouth Corp. Headquartered in Birmingham, Alabama, HealthSouth Corp. (NYSE: HLS) -- http://www.healthsouth.com/-- provides inpatient rehabilitation services. Operating in 26 states across the country and in Puerto Rico, HealthSouth serves more than 250,000 patients annually through its network of inpatient rehabilitation hospitals, long-term acute care hospitals, outpatient rehabilitation satellites, and home health agencies. At Sept. 30, 2008, the company's balance sheet showed total assets of $1.9 billion and total liabilities of $3.3 billion, resulting in a shareholders' deficit of about $1.4 billion. For three months ended Sept. 30, 2008, the company's net income was $6.6 million compared with net income of $287.6 million for the same period in the previous year. For nine months ended Sept. 30, 2008, the company reported net income of $70.5 million compared with net income of $699.2 million for the same period in the previous year. In total and through October 2008, the company has reduced its total debt outstanding by approximately $208 million since Dec. 31, 2007. Total debt outstanding approximated $1.8 billion as of Oct. 31, 2008. HELIX ENERGY: Moody's Reviews 'B2' Ratings for Possible Downgrade ----------------------------------------------------------------- Moody's Investors Service placed Helix Energy Solutions Group, Inc.'s ratings under review for possible downgrade following Helix's announcement that the company intends to divest all or a portion of its oil and gas assets, its interest in Gulf of Mexico production facilities and its 58% stake in the oil field services company Cal Dive International. Ratings affected include Helix's B2 Corporate Family Rating, B2 Probability of Default Rating, B3 (LGD4, 68%) senior unsecured rating and Ba2 (LGD 2, 20%) senior secured rating. Moody's also downgraded Helix's speculative grade liquidity rating to SGL-4 from SGL-3. The review for downgrade is a result of uncertainly following the company's announcement that it intends to focus and reshape the company's business model while reducing debt during a challenging financial market. The SGL-4 reflects Moody's expectation that the company's cash flow will not be sufficient to cover capex, working capital needs and interest expense over the next four quarters. The SGL-4 also considers the company's $420 million senior secured revolver (with no borrowing base). As of October 2008 Helix had less than $47 million of availability under its revolving credit agreement but Moody's believes covenant compliance could be tight in 2009 given effect to results of production interruption on current quarters. Helix would require external financing through asset monetization or liquidity from its ownership of Cal Dive's shares and its interest in the GOM production facilities in order to finance current operations and continue with the three vessel newbuild program. The last rating action was December 10, 2007, when Moody's affirmed Helix's B2 CFR, assigned a B3 (LGD4, 68%) senior unsecured note rating, and upgraded Helix's senior secured rating to Ba2 (LGD 2, 20%). The outlook was changed to positive from stable. Helix Energy Solutions Group, Inc. is headquartered in Houston, Texas. HEXION SPECIALTY: Inks $1BB Huntsman Settlement; Merger Canceled ---------------------------------------------------------------- Huntsman Corporation terminated its Merger Agreement with Hexion Specialty Chemicals, Inc. In addition, Huntsman reached an agreement with Hexion, Apollo Management, L.P., and certain of its affiliates to settle Huntsman's claims against Hexion, Apollo and its affiliates arising in connection with Huntsman's Merger Agreement with Hexion. Payments to be made to Huntsman under the Settlement Agreement total $1 billion. In addition to the $325 million break-up fee to be paid as provided in the Merger Agreement and which Hexion expects will be funded by Credit Suisse and Deutsche Bank under an existing commitment, certain affiliates of Apollo will make cash payments to Huntsman under the Settlement Agreement totalling $425 million. Certain affiliates of Apollo also will pay Huntsman an additional $250 million in exchange for 10 year convertible notes issued by Huntsman in that principal amount, which may be repaid at maturity in cash or common stock at Huntsman's election. At least $500 million of the payments are to be paid to Huntsman on or before December 31, 2008, and any remaining payments that have not been made by that date must be made on or before March 31, 2009. The Settlement Agreement also resolves Huntsman's pending claims against Apollo and its affiliates relating to Huntsman's prior merger agreement with Basell AF. In announcing the settlement, Huntsman's President and CEO Peter R. Huntsman stated, "We are pleased to have reached this agreement with Hexion and Apollo. Receipt of these proceeds will enhance the strength of Huntsman's balance sheet and better position our company to prosper during the current turbulence in the global economy. Additionally, our associates, customers and suppliers can now put the uncertainty concerning the outcome of the merger with Hexion behind them." Leon Black, Chairman of Apollo Global Management, LLC, added, "We are happy to be resolving this situation in the best interest of our investors. It puts to an end the six month disagreement and distraction between our companies. As the majority stakeholder in Hexion and now an investor in Huntsman, we look forward to both companies traversing this economic cycle and prospering." The settlement with Hexion, Apollo and its affiliates does not resolve the claims asserted by Huntsman against the Banks in its ongoing litigation against the Banks in Montgomery County, Texas. Huntsman's suit against the Banks includes claims that the banks conspired with Apollo and tortiously interfered with Huntsman's prior merger agreement with Basell, as well as with the later Merger Agreement with Hexion. A jury trial on those claims currently is set to begin on May 11, 2009. As part of the Settlement Agreement, Apollo and its principals have agreed to fully cooperate in connection with Huntsman's litigation against the Banks. Huntsman noted in a filing with the Securities and Exchange Commission that, of the $1 billion, certain affiliates of Apollo have agreed to pay Huntsman $425 million in cash and purchase $250 million of Huntsman's 7% Convertible Senior Notes in that principal amount. In addition, Hexion has agreed to pay the $325 million termination fee as required under the Merger Agreement. Apollo and its affiliates have agreed that at least $500 million of the purchase from and payments to Huntsman will be paid on or before December 31, 2008. In addition, Hexion has agreed to pay to Huntsman the $325 million termination fee as soon as Hexion LLC receives the proceeds of the Termination Facility, but in no event later than March 31, 2009. Any portion of the $1 billion that has not been paid to Huntsman by December 31, 2008, must be paid to Huntsman on or before March 31, 2009. The Notes will mature on the 10th anniversary of the date they are issued. Jon M. Huntsman, Founder and Executive Chairman of Huntsman Corporation, commented, "This is a significant settlement for our company and its shareholders, but we must continue to pursue our multi-billion dollar Texas case against Credit Suisse and Deutsche Bank for the harm they have caused. We remain focused on preparing for our May jury trial against the Banks." A full-text copy of the Settlement Agreement and Release, dated December 14, 2008, among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates, is available at no charge at: http://ResearchArchives.com/t/s?3643 A full-text copy of the Letter Agreement, dated December 14, 2008, among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates, is available at no charge at: http://ResearchArchives.com/t/s?3644 Pursuant to the Letter Agreement, Huntsman agreed to pay the Apollo Parties an amount of cash equal to 20% of the value of cash and non-cash consideration that is in excess of $500 million that the company may obtain or receive in settlement in connection with any claims made by the company against the Banks arising from or relating to the Merger Agreement, the transactions contemplated thereby and related matters, including the Texas Action Against the Banks, after the company first recovers its attorneys' fees, costs and expenses in making the claim. In no circumstance will the aggregate amount of payments owed by the company to the Apollo parties under the Letter Agreement exceed $425 million. Moreover, in the event trial commences in the Texas Action Against the Banks, any interest on the part of the Apollo Parties will terminate immediately and the company will not owe any portion of any subsequent recovery to the Apollo Parties. The Letter Agreement and the obligations thereunder terminate if the company is not paid in full the $1 billion under the Settlement Agreement before April 1, 2009. About Huntsman Headquartered in Salt Lake City, Utah, Huntsman Corporation (NYSE: HUN) -- http://www.huntsman.com/-- is a manufacturer of differentiated chemical products and inorganic chemical products. The company operates in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. Its products are used in a range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries. Its Latin American operations are in Argentina, Brazil, Chile, Colombia, Guatemala, Panama and Mexico. At September 30, 2008, the company's consolidated balance sheet showed US$8.41 billion in total assets, US$6.64 billion in total liabilities, US$33.5 million in minority interests, and US$1.73 billion in total stockholders' equity. * * * As reported by the Troubled Company Reporter on Oct. 3, 2008, Standard & Poor's Ratings Services said that its ratings on Huntsman Corp. and Hexion Specialty Chemicals Inc. remain on CreditWatch with negative implications, where they were placed on July 5, 2007. The initial CreditWatch placement followed the announcement of Hexion's proposed debt-financed acquisition of Huntsman in a transaction valued at more than US$10 billion, including assumed debt. In June 2008, S&P said that its ratings on Huntsman Corp. (BB- /Watch Neg/--) remain on CreditWatch with negative implications, where they were placed on July 5, 2007. As reported in the Troubled Company Reporter on Oct. 6, 2008, Huntsman Corp. (Huntsman - Ba3 Corporate Family Rating - Rating Under Review For Downgrade) issued a press release on Sept. 29, 2008 announcing the decision of the Delaware Court of Chancery to enter judgment in favor of Huntsman denying all declarations sought by Apollo Management, L.P. and Hexion Specialty Chemicals, Inc., in their suit requesting that the Court excuse Hexion from its obligation to consummate the pending transaction. About Hexion Specialty Based in Columbus, Ohio, Hexion Specialty Chemicals Inc. -- http://www.hexionchem.com/-- is a producer of thermosetting resins, or thermosets. Thermosets are a critical ingredient in virtually all paints, coatings, glues and other adhesives produced for consumer or industrial uses. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management L.P. Hexion's balance sheet at Sept. 30, 2008, showed total assets of $3.8 billion and total liabilities of $5.4 billion, resulting in a shareholders' deficit of $1.6 billion. HEXION SPECIALTY: Restates 1st and 2nd Quarter 2008 Financials -------------------------------------------------------------- Hexion Specialty Chemicals Inc. filed with the Securities and Exchange Commission on November 21, 2008: -- Amendment No. 1 on Form 10-Q/A to amend its Quarterly Report on Form 10-Q, initially filed on May 14, 2008, for the quarter ended March 31, 2008, to restate the financial statements included therein; -- Amendment No. 1 on Form 10-Q/A to amend its Quarterly Report on Form 10-Q, initially filed on August 14, 2008, for the quarter ended June 30, 2008, to restate the financial statements included therein. The restatement of the March 2008 earnings report resulted from errors the Company discovered on November 10, 2008, in its non- cash unrealized foreign exchange gains and losses on intercompany balances recorded in the Company's results of operations during the three months ended March 31, 2008. The errors related to the misapplication of procedures for a newly-implemented system enhancement to record foreign exchange gains and losses on intercompany balances. The correction resulted in an increase of $1 million in operating income, a decrease of $9 million in non- operating income, and a decrease of $6 million in net income for the three months ended March 31, 2008. A full-text copy of the Company's Form 10-Q/A for the March 2008 reporting period is available at no charge at: http://ResearchArchives.com/t/s?3646 The restatement of the June 2008 earnings report resulted from errors the Company discovered on November 10, 2008, in its non- cash unrealized foreign exchange gains and losses on intercompany balances recorded in the Company's results of operations during the three and six months ended June 30, 2008. The errors related to the misapplication of procedures for a newly-implemented system enhancement to record foreign exchange gains and losses on intercompany balances. The correction resulted in a decrease of $2 million in operating income, an increase of $1 million in non- operating income, and a decrease of $1 million in net income for the three months ended June 30, 2008; and a decrease of $1 million in operating income, a decrease of $8 million in non- operating income, and a decrease of $7 million in net income for the six months ended June 30, 2008. A full-text copy of the Company's Form 10-Q/A for the June 2008 reporting period is available at no charge at: http://ResearchArchives.com/t/s?3645 About Hexion Specialty Based in Columbus, Ohio, Hexion Specialty Chemicals Inc. -- http://www.hexionchem.com/-- is a producer of thermosetting resins, or thermosets. Thermosets are a critical ingredient in virtually all paints, coatings, glues and other adhesives produced for consumer or industrial uses. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management L.P. Hexion's balance sheet at Sept. 30, 2008, showed total assets of $3.8 billion and total liabilities of $5.4 billion, resulting in a shareholders' deficit of $1.6 billion. HIDDEN SPLENDOR: Confirms Plan, Nears Emergence ----------------------------------------------- Hidden Splendor Resources Inc., is nearing emergence after confirming its Chapter 11 plan last week. According to Bloomberg's Bill Rochelle, the plan provides for these terms: -- The $5.9 million secured loan held by Zions First National Bank will be reinstated. -- Unsecured creditors with claims of $3.4 million are to receive between 50% and 70%. -- America West Resources LLC will provide a $2.25 million contribution, As reported by the Dec. 11 of the Troubled Company Reporter, America West Resources said that its wholly owned subsidiary, Hidden Splendor, the Chapter plan will become effective on Dec. 19, 2008, at which time the subsidiary will officially emerge from bankruptcy. About Hidden Splendor Based in Reno, Nevada, Hidden Splendor Resources, Inc., is a real estate investment trust. The company and its affiliate, Mid-State Services, Inc., filed for chapter 11 protection on Oct. 15, 2007 (Bankr. D. Nev. Case Nos. 07-51378 & 07-51379). John A. White, Jr., Esq., represents the Debtor in its restructuring efforts. The U.S. Trustee for Region 17 has appointed five creditors to serve on an Official Committee of Unsecured Creitors for the Debtor's case. Mark E. Freedlander, Esq., at McGuirewoods LLP, represents the Committee. Hidden Splendor diclosed estimated assets between $10 million and $50 million and estimated debts between $1 million and $10 million at the time of its filing. Mid-State disclosed estimated assets and debts between $1 million and $10 million. HINES HORTICULTURE: Bid Procedures Ok'd; Dec. 16 Sale Hearing Set ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware approved the proposed bid procedures for the sale of all or substantially all of the assets of Hines Horticulture, Inc. and its affiliated debtors, the procedures for the assumption and assignment of assigned contracts, including notice of proposed cure amounts and the grant of certain bid protections to the stalking horse bidder. A full-text copy of the approved Bid Procedures is available for free at http://researcharchives.com/t/s?3639 Objections to Cure Amounts Where a counterparty to an executory contract or unexpired lease files a timely Contract Objection asserting a higher cure amount and the parties are unable to consensually resolve the dispute, the amount to be paid under Sec. 365 of the Bankruptcy Code, if any, with respect to such objection will be determined at the hearing to be requested by the Debtors or by the objecting counterparty. If the Contract Objection cannot be resolved within 14 days following the closing of the sale (or before Dec. 29, 2008, in the case of leases of nonresidential real property), the Pending Assigned Contracts shall be rejected in their entirety. Break-Up Fee and Expense Reimbursement Pursuant to the Stalking Horse Agreement, the Stalking Horse Bidder will be entitled to a Break-up Fee of $1,500,000 and Expense Reimbursement not to exceed $775,000, exclusive of, and in addition to, the Initial Work Fee. The Debtors' obligation to pay the Bid protections will constitute a superpriority administrative expense claim in favor of the Buyer having priority over any and all administrative expenses under Sec. 503(b) and 507(c) of the Bankruptcy Code, junior only to the claims of the proposed postpetition secured lenders. Auction Sale The Auction is scheduled on Dec. 15, 2008, at the offices of Debtors' counsel, Young Conaway Stargatt & Taylor, LLP, The Brandywine Building, 1000 West Street, 17th Floor, in Wilmington, Delaware, or such later day or other place as the Debtors will notify in writing counsel to the Committee and all Qualified Bidders. The Sale Hearing will be conducted at 11:30 a.m. on Dec. 16, 2008. During the Sale Hearing, the Debtors will seek entry of an order approving and authorizing the sale of the Acquired Assets to the Successful Bidder. About Hines Horticulture Headquartered in Irvine, California, Hines Horticulture, Inc. -- http://www.hineshorticulture.com/-- operates nursery facilities located in Arizona, California, Oregon and Texas. Through its affiliate, the company produces and distributes horticultural products. The company and its affiliate, Hines Nurseries, Inc., filed for Chapter 11 protection on Aug. 20, 2008 (Bankr. D. Del. Lead Case No.08-11922). Anup Sathy, Esq., Ray C.Schrock, Esq., and Ross M. Kwasteniet, Esq., at Kirkland & Ellis, LLP, represent the Debtors in their restructure efforts. Robert S. Brady, Esq., and Edmon L. Morton, Esq., at Young, Conaway, Stargatt & Taylor, serve as the Debtors' co-counsel. The Debtors selected Epiq Bankruptcy Solutions LLC as their voting and claims agent, and Financial Balloting Group LLC as their securities voting agent. The U.S. Trustee for Region 3 appointed creditors to serve on an Official Committee of Unsecured Creditors in the Debtors' case. In its schedules, Hines Horticulture, Inc. listed total assets of $30,068 and total debts of $218,052,380. In its schedules, Hines Nurseries, Inc. listed total assets of $229,231,003 and total debts of $228,698,592. HOVNANIAN ENTREPRISES: Fitch Affirms Issuer Default Rating at 'B-' ------------------------------------------------------------------ Fitch Ratings has affirmed Hovnanian Enterprises, Inc.'s Issuer Default Ratings and outstanding debt ratings: -- IDR at 'B-'; -- Senior secured revolving credit facility at 'BB-/RR1'; -- Senior secured notes at 'BB-/RR1'; -- Senior unsecured notes at 'B-/RR4'; -- Senior subordinated notes at 'CCC/RR6'; -- Series A perpetual preferred stock at 'CCC-/RR6'. HOV's Rating Outlook remains Negative. Fitch's Recovery Rating of '1' on HOV's secured revolving credit facility and senior secured second-lien notes indicates outstanding (90%-100%) recovery prospects for holders of these debt issues. The 'RR4' on HOV's senior unsecured notes indicates average (30%-50%) recovery prospects for holders of these debt issues. HOV's exposure to claims made pursuant to performance bonds and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. The 'RR6' on HOV's senior subordinated notes and preferred stock indicates poor recovery prospects (0%-10%) in a default scenario. Fitch applied a liquidation value analysis for these RRs. The ratings and Outlook for HOV reflect the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The Outlook also reflects negative trends in HOV's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. However, the company's liquidity position provides a buffer and supports the current ratings. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. HOV generated $652.9 million of cash from operations during the latest twelve months from July 31, 2008 and ended the quarter with $677.2 million of cash on the balance sheet. The company expects to generate additional cash during its fourth quarter (ending Oct. 31, 2008) and end the year with cash of approximately $800 million. HOV has no major debt maturities until 2010, when $100 million of senior subordinated notes become due. Most recently, HOV issued an aggregate principal amount of $29.3 million of 18% senior secured notes (third-priority lien) due 2017 in exchange for certain of the company's senior unsecured notes in a private exchange offer. The senior unsecured notes exchanged in the transaction totaled $71.4 million. The debt exchange was an opportunistic transaction for HOV that allowed the company to reduce debt by approximately $42.1 million and extend the maturity of $29.3 million of current debt to 2017. Future ratings and Outlooks will be influenced by the economy and broad housing market trends as well as company-specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new-order activity, debt levels and free cash flow trends and uses. The possibility of the housing downturn continuing longer and becoming deeper than currently anticipated could have broad ratings implications for homebuilders. HUNTSMAN CORP: Drops Merger, Gets $1B from Hexion & Apollo ---------------------------------------------------------- Huntsman Corporation terminated its Merger Agreement with Hexion Specialty Chemicals, Inc. In addition, Huntsman reached an agreement with Hexion, Apollo Management, L.P., and certain of its affiliates to settle Huntsman's claims against Hexion, Apollo and its affiliates arising in connection with Huntsman's Merger Agreement with Hexion. Payments to be made to Huntsman under the Settlement Agreement total $1 billion. In addition to the $325 million break-up fee to be paid as provided in the Merger Agreement and which Hexion expects will be funded by Credit Suisse and Deutsche Bank under an existing commitment, certain affiliates of Apollo will make cash payments to Huntsman under the Settlement Agreement totalling $425 million. Certain affiliates of Apollo also will pay Huntsman an additional $250 million in exchange for 10 year convertible notes issued by Huntsman in that principal amount, which may be repaid at maturity in cash or common stock at Huntsman's election. At least $500 million of the payments are to be paid to Huntsman on or before December 31, 2008, and any remaining payments that have not been made by that date must be made on or before March 31, 2009. The Settlement Agreement also resolves Huntsman's pending claims against Apollo and its affiliates relating to Huntsman's prior merger agreement with Basell AF. In announcing the settlement, Huntsman's President and CEO Peter R. Huntsman stated, "We are pleased to have reached this agreement with Hexion and Apollo. Receipt of these proceeds will enhance the strength of Huntsman's balance sheet and better position our company to prosper during the current turbulence in the global economy. Additionally, our associates, customers and suppliers can now put the uncertainty concerning the outcome of the merger with Hexion behind them." Leon Black, Chairman of Apollo Global Management, LLC, added, "We are happy to be resolving this situation in the best interest of our investors. It puts to an end the six month disagreement and distraction between our companies. As the majority stakeholder in Hexion and now an investor in Huntsman, we look forward to both companies traversing this economic cycle and prospering." The settlement with Hexion, Apollo and its affiliates does not resolve the claims asserted by Huntsman against the Banks in its ongoing litigation against the Banks in Montgomery County, Texas. Huntsman's suit against the Banks includes claims that the banks conspired with Apollo and tortiously interfered with Huntsman's prior merger agreement with Basell, as well as with the later Merger Agreement with Hexion. A jury trial on those claims currently is set to begin on May 11, 2009. As part of the Settlement Agreement, Apollo and its principals have agreed to fully cooperate in connection with Huntsman's litigation against the Banks. Huntsman noted in a filing with the Securities and Exchange Commission that, of the $1 billion, certain affiliates of Apollo have agreed to pay Huntsman $425 million in cash and purchase $250 million of Huntsman's 7% Convertible Senior Notes in that principal amount. In addition, Hexion has agreed to pay the $325 million termination fee as required under the Merger Agreement. Apollo and its affiliates have agreed that at least $500 million of the purchase from and payments to Huntsman will be paid on or before December 31, 2008. In addition, Hexion has agreed to pay to Huntsman the $325 million termination fee as soon as Hexion LLC receives the proceeds of the Termination Facility, but in no event later than March 31, 2009. Any portion of the $1 billion that has not been paid to Huntsman by December 31, 2008, must be paid to Huntsman on or before March 31, 2009. The Notes will mature on the 10th anniversary of the date they are issued. Jon M. Huntsman, Founder and Executive Chairman of Huntsman Corporation, commented, "This is a significant settlement for our company and its shareholders, but we must continue to pursue our multi-billion dollar Texas case against Credit Suisse and Deutsche Bank for the harm they have caused. We remain focused on preparing for our May jury trial against the Banks." A full-text copy of the Settlement Agreement and Release, dated December 14, 2008, among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates, is available at no charge at: http://ResearchArchives.com/t/s?3643 A full-text copy of the Letter Agreement, dated December 14, 2008, among Huntsman Corporation, Jon M. Huntsman, Peter R. Huntsman, Hexion Specialty Chemicals, Inc., Hexion LLC, Nimbus Merger Sub, Inc., Craig O. Morrison, Leon Black, Joshua J. Harris and Apollo Global Management, LLC and certain of its affiliates, is available at no charge at: http://ResearchArchives.com/t/s?3644 Pursuant to the Letter Agreement, Huntsman agreed to pay the Apollo Parties an amount of cash equal to 20% of the value of cash and non-cash consideration that is in excess of $500 million that the company may obtain or receive in settlement in connection with any claims made by the company against the Banks arising from or relating to the Merger Agreement, the transactions contemplated thereby and related matters, including the Texas Action Against the Banks, after the company first recovers its attorneys' fees, costs and expenses in making the claim. In no circumstance will the aggregate amount of payments owed by the company to the Apollo parties under the Letter Agreement exceed $425 million. Moreover, in the event trial commences in the Texas Action Against the Banks, any interest on the part of the Apollo Parties will terminate immediately and the company will not owe any portion of any subsequent recovery to the Apollo Parties. The Letter Agreement and the obligations thereunder terminate if the company is not paid in full the $1 billion under the Settlement Agreement before April 1, 2009. About Hexion Specialty Based in Columbus, Ohio, Hexion Specialty Chemicals Inc. -- http://www.hexionchem.com/-- is a producer of thermosetting resins, or thermosets. Thermosets are a critical ingredient in virtually all paints, coatings, glues and other adhesives produced for consumer or industrial uses. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management L.P. Hexion Specialty Chemicals Inc.'s balance sheet at Sept. 30, 2008, showed total assets of $3.8 billion and total liabilities of $5.4 billion, resulting in a shareholders' deficit of $1.6 billion. About Huntsman Headquartered in Salt Lake City, Utah, Huntsman Corporation (NYSE: HUN) -- http://www.huntsman.com/-- is a manufacturer of differentiated chemical products and inorganic chemical products. The company operates in four segments: Polyurethanes, Materials and Effects, Performance Products and Pigments. Its products are used in a range of applications, including those in the adhesives, aerospace, automotive, construction products, durable and non-durable consumer products, electronics, medical, packaging, paints and coatings, power generation, refining, synthetic fiber, textile chemicals and dye industries. Its Latin American operations are in Argentina, Brazil, Chile, Colombia, Guatemala, Panama and Mexico. At September 30, 2008, the company's consolidated balance sheet showed US$8.41 billion in total assets, US$6.64 billion in total liabilities, US$33.5 million in minority interests, and US$1.73 billion in total stockholders' equity. * * * As reported by the Troubled Company Reporter on Oct. 3, 2008, Standard & Poor's Ratings Services said that its ratings on Huntsman Corp. and Hexion Specialty Chemicals Inc. remain on CreditWatch with negative implications, where they were placed on July 5, 2007. The initial CreditWatch placement followed the announcement of Hexion's proposed debt-financed acquisition of Huntsman in a transaction valued at more than US$10 billion, including assumed debt. In June 2008, S&P said that its ratings on Huntsman Corp. (BB- /Watch Neg/--) remain on CreditWatch with negative implications, where they were placed on July 5, 2007. As reported in the Troubled Company Reporter on Oct. 6, 2008, Huntsman Corp. (Huntsman - Ba3 Corporate Family Rating - Rating Under Review For Downgrade) issued a press release on Sept. 29, 2008 announcing the decision of the Delaware Court of Chancery to enter judgment in favor of Huntsman denying all declarations sought by Apollo Management, L.P. and Hexion Specialty Chemicals, Inc., in their suit requesting that the Court excuse Hexion from its obligation to consummate the pending transaction. INDALEX HOLDING: S&P Cuts Rating on Senior Secured Notes to 'CCC-' ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its corporate credit rating on Lincolnshire, Illinois-based Indalex Holding Corp. to 'CCC' from 'CCC+'. The outlook is negative. At the same time, S&P lowered its rating on its $270 million senior secured notes due 2014 to 'CCC-' from 'CCC' and kept the recovery rating at '5', indicating the expectation of modest (10%- 30%) recovery in the event of a payment default. "The downgrade reflects the continuing deterioration of the company's liquidity position, and a worsening of market conditions in the aluminum industry with prices declining to below $0.80 per pound as a result of weak end markets," said S&P's credit analyst Sherwin Brandford. While S&P had expected the company's near term liquidity to continue to deteriorate due to market weakness, the pace of decline has been more rapid than expected, with availability on the company's $200 million asset-based-revolver just $37 million as of Sept. 30, 2008. The company improved its liquidity modestly with the infusion of a $15 million term loan from an affiliate of its equity sponsor, Sun Capital Partners Inc., but S&P continues to expect the company's liquidity to remain very tight and potentially deteriorate further given market conditions. The ratings reflect the company's exposure to highly cyclical and competitive markets, thin margins, import concerns, negative free cash flow, and shrinking liquidity. S&P expects challenging market conditions and continued lower volumes during the next few quarters to keep on constraining Indalex's liquidity, and could cause the company to breach its covenants, potentially leading to another downgrade. Specifically, there is a high likelihood that the company's liquidity will fall below the minimum level required under its credit agreement and, should this happen, Indalex will fail its fixed charge coverage test. JOSEPH MALONE: Voluntary Chapter 11 Case Summary ------------------------------------------------ Debtor: Joseph Scott Malone Tamara Malone 1551 E. Lynwood St. Mesa, AZ 85203 Bankruptcy Case No.: 08-18058 Chapter 11 Petition Date: December 12, 2008 Court: District of Arizona (Phoenix) Judge: James M. Marlar Debtor's Counsel: Keith M. Knowlton, Esq. keithknowlton@msn.com Keith M. Knowlton L.L.C. 1630 S. Stapley, #231 Mesa, AZ 85204 Tel: (480) 755-1777 Fax: (480) 755-8286 Estimated Assets: $1 million to $10 million Estimated Debts: $500 million to $1 billion The Debtor did not file a list of 20 largest unsecured creditors. KB HOME: Fitch Downgrades Issuer Default Rating to 'BB-' -------------------------------------------------------- Fitch Ratings has downgraded KB Home's Issuer Default Rating and outstanding debt ratings: -- IDR to 'BB-' from 'BB+'; -- Senior unsecured to 'BB-' from 'BB+'; -- Unsecured bank credit facility to 'BB-' from 'BB+'; -- Senior subordinated debt to 'B' from 'BB-'. The Rating Outlook remains Negative. The downgrade reflects the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The Outlook also reflects negative trends in KBH's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. However, KBH's liquidity position provides a buffer and supports the current ratings. Fitch believes that there is potential for lower cash flow from operations next year relative to Fiscal 2008. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. The ratings reflect KBH's execution of its business model, as well as the company's primary focus on entry-level and first-step trade-up housing (the deepest segments of the market), its conservative building practices, and effective utilization of return on invested capital criteria as a key element of its operating model. In recent years KBH has improved its capital structure and increased its geographic diversity and has better positioned itself to withstand this meaningful housing downturn. Fitch also has taken note of KB Home's role as an active consolidator within the industry. KBH maintains a three-year supply of lots (based on last 12 months deliveries), 70.2% of which are owned and the balance controlled through options. (The options share of total lots controlled is down sharply over the past two years as the company has written off substantial numbers of options.) As the housing cycle continues to contract, creditors should benefit from KB Home's solid financial flexibility supported by cash and equivalents of $942.5 million and $614.2 million available under its $800 million unsecured credit facility (net of $185.8 million of letters of credit) as of Aug. 31, 2008. In addition, liquid, primarily pre-sold work-in-process, and finished inventory totaling $2.56 billion provides comfortable coverage for construction debt. KBH has $200 million of senior subordinated notes coming due on December 15, 2008. The company does not have any other major debt maturing until August 2011, when $350 million of senior notes mature. As of Aug. 31, 2008, KBH's unconsolidated joint ventures had total debt of $1.46 billion. Of the total debt, $2.8 million was recourse and an additional $220.2 million had limited recourse to KB Home. KBH had provided a several guaranty to the lenders of one of its unconsolidated joint ventures. At Aug. 31, 2008, this JV had total outstanding debt of $373.9 million, and, if this guaranty were enforced, KBH's potential responsibility under the guaranty would be approximately $182.7 million. This JV has received notices from its lender's administrative agent alleging a number of defaults under the loan agreement. KBH is currently exploring resolutions with the lenders and its JV partners. In August 2008, KBH amended its unsecured revolving credit facility. As part of the amendment, the commitments under the revolver were reduced from $1.3 billion to $800 million. The credit facility is also subject to further reductions if the company's tangible net worth falls below certain thresholds. Additionally, the TNW covenant was reset to $1 billion (and allows for the exclusion of up to $721.7 million of deferred tax valuation allowance) and its leverage and interest coverage requirements were also modified. At Aug. 31, 2008, KBH had an $812 million cushion under its TNW covenant. KB TOYS: Gets Court's Approval to Pay 10,900 Employees ------------------------------------------------------ KB Toys Inc. obtained permission from the Hon. Kevin Carey of the United States Bankruptcy Court for the District of Delaware to maintain paying its 4,400 full-time and 6,500 holiday employees as it wind-down 431 stores to raise cash to pay its creditors, according Steven Church of Bloomberg News. "It's critical that people continue to work and continue to maintain their morale," Bloomberg quoted a person with knowledge of the matter. The company, Mr. Church says, also obtained authority from the Court to rely on its cash flow to liquidate its business and pay for expenses related to the bankruptcy on the interim. In addition, the Court authorized the company to continue to honor its gift cards, Bloomberg relates. About KB Toys Headquartered in Pittsfield, Massachusetts, KB Toys, Inc. -- http://www.kbtoys.com-- operates a chain of retail toy stores. On Jan. 14, 2008, the Debtor and 69 of its affiliates filed for protection under Chapter 11 of the Bankruptcy Code, which were administratively consolidated under Case No. 04-10120. Two of the 200 bankruptcy cases remain open, KB Toys Inc. and KB Toy of Massachusetts Inc. In connection with the emergence of KB Toys from bankruptcy in August 2005, and the subsequent organizational restructuring, the assets and operations of may of these prior debtors were transferred among then existing debtor entities and consolidated with KB Toys Group. Furthermore, most of the entities involved were either dissolved or were merged into surviving entities, and several of them changed their names. As a result, nine Debtors and four inactive special purpose units which are not debtors. The company and eight of its affiliates filed for Chapter 11 on December 11, 2008 (Bankr. D. Del. Lead Case No. 08-13269). Joel A. Waite, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor LLP, represent the Debtors in their restructuring efforts. The Debtors proposed Wilmer Cutler Pickering Hale and Dorr LLP as their co-counsel, FTI Consulting Inc. as financial and restructuring advisor, and Epiq Bankruptcy Solutions LLC as claims and noticing agent. When the Debtors filed for protection from their creditors, they listed assets and debts between $100 million to $500 million each. KB TOYS: Returns to Bankruptcy Due to Rapid Decline in Sales ------------------------------------------------------------ Bloomberg News' Bill Rochelle reports that KB Toys Inc., together with eight affiliates, returned to Chapter 11 as comparable-store sales contracted by 20 percent between Oct. 5 and Dec. 8. KB Toys, according to Mr. Rochelle's report, decided that liquidating during the holiday season would be the best outcome for creditors. KB intends to close the 431 stores in going-out-of business sales that will begin Dec. 19. As reported in last Friday's Troubled Company Reporter, KB Toys said in court documents that it wants to start with going- out-of-business sales at hundreds of its stores right away "to take advantage of the last two weeks of the holiday selling season." KB Toys, according to WSJ, has 277 stores located primarily in shopping malls, along with 40 KB Toy Works stores in strip malls. Court documents say that the company runs 114 outlet stores and 30 temporary "holiday stores." Bloomberg relates that KB selected a joint venture between Gordon Brothers Retail Partners LLC and Great American Group LLC to serve as consultants for the GOB sales. KB, according to the report, will pay the expenses, while the liquidators will receive a fee equal to: -- 2% if the proceeds of the liquidation are between 48% and 52% of retail value. -- 2.25% if the recovery exceeds 52%. -- no fee if the recovery is less than 48%. KB has asked the U.S. Bankruptcy Court for the District of Delaware to hold a hearing by Dec. 18 to approve the GOB sales and the engagement of the liquidators. About KB Toys Headquartered in Pittsfield, Massachusetts, KB Toys Inc. -- http://www.kbtoys.com/-- is a combined mall-based and online specialty toy retailer. The company and its affiliates operate a chain of retail toy stores. KB first filed for Chapter 11 in 2004 and emerged from bankruptcy in August 2005. KB, together with nine affiliates, again filed for Chapter 11 on Dec. 11, 2008 (Bankr. D. Del., Leasd Case No. 08-13269). Judge Kevin. J. Carey handles the case., Joel A. Waite, Esq., and Matthew Barry Lunn, Esq., at Young, Conaway, Stargatt & Taylor LLP, have been tapped as bankruptcy counsel for KB. In its second bankruptcy filing, KB listed assets of $241 million against debt totaling $362 million. KEY PLASTICS: Financial Woes Cue Chapter 11; Files Prepack Plan --------------------------------------------------------------- Key Plastics LLC along with its affiliate, Key Plastics Finance Corp., filed a voluntary petition under Chapter 11 of the United States Bankruptcy Court for the District of Delaware citing financial difficulties due to the recent economic downturn in the automotive industry. The company said it defaulted under the indenture governing the 11-3/4% senior secured notes due 2013 that resulted in a cross default under a certain revolving credit facility agreement with The CIT Group/Business Credit Inc. and Jefferies Finance dated March 12, 2007. The company further said that it replaced the facility with a prepetition term loan of $10 million. In conjunction with the Chapter 11 filing, the company proposes a joint Chapter 11 prepackaged plan of reorganization to restructure its existing equity and debts by conversion of its senior secured debt into equity or retirement. Under the plan, each holder of series A unit claims will be paid equal to $474 per series A unit in cash. At its option, holders will be entitled to receive, either: -- pro rata share of 65% of the full-diluted new common units to be issued by the company post-confirmation, which will be subsequently be contributed to the reorganized Finance Corp. in turn for an equal percentage of new common stock to be issued by the reorganized Finance Corp.; or -- cash equal to 16% of the face value of the holder's senior notes. Furthermore, holders of senior notes who elect to receive their pro rata share of new the company equity in which holders may subscribe for its pro rata share of no more than 35% of the new company equity, which will also be subsequently be contributed to the reorganized Finance Corp. in exchange for an equal percentage of new Finance Corp. equity. On the Plan's effective date, 100% of new company equity will be held by the reorganized Finance Corp. and 100% of new Finance Corp. equity will be held by former holders of senior notes, rendering reorganized company as wholly-owned subsidiary of the reorganized Finance Corp. According to the company, the plan provides for the payment in full of allowed (i) administrative expense claims; (ii) priority tax claims; (iii) claims pursuant to any debt facilities approved by the Court; (iv) other priority claims; (v) lease rejection claims; and (vi) general unsecured claims -- including trade creditor claims. The plan leaves holders of other secured claims against the Debtors impaired, the company noted. The company related that on Nov. 12, 2008, it solicited votes on the plan, wherein holders of senior notes claims and series A unit claims voted to accept the plan. The company said that the plan contemplates the reduction of its outstanding indebtedness by as much as $121.756 million, which will provide the company with greater liquidity, better positioning from an operation standpoint ahead. In addition, the company said Wayzata Investment Partners LLC will provide up to $20 million in rights offering to fund the restructuring, among other things. The company said it expects that the restructuring will be completed by January 2009. Ralph Ralston, President & COO of the company's North American operations, stated, "In the face of today's economic conditions, we are pleased to have achieved such strong support for a consensual restructuring that is beneficial to our employees, customers, and suppliers by dramatically improving our balance sheet, eliminating the related debt service obligations, and enabling continued reinvestment in our products and future growth." "This process will give Key Plastics one of the strongest financial profiles in the industry, and allow us to persevere through the current industry environment while continuing to provide exceptional products and services to our customers worldwide. We look forward to the continued support of Wayzata and DDJ and their long-term commitment to the business," Mr. Ralston said. The company listed assets and debts between $100 million and $500 million in its filing. The company owes $1.4 million to BASF Corporation; $1.4 million to Jing Mei Automotive (USA) Inc.; and $478,975 to Basilius Tool Company. Chief financial officer John Will disclosed that KAC Acquisition Company owns 100% of Key Plastics LLC common interest; Bank One, NA, owns 11.9% of Key Plastics LLC series A preferred units; and Eaton Vance Corp. owns 10.3% of Key Plastic LLC series A preferred. About Key Plastic Headquartered in Northville, Michigan, Key Plastics LLC -- http://www.keyplastics.com/-- supplies plastic components to the automotive industry. The company has 24 manufacturing facilities located in the United States, Canada, Mexico, Germany, Portugal, Spain, the Czech Republic, France, Slovakia, Italy and China. According to Bloomberg News, the company filed for bankruptcy in March 23, 2000, in Detroit and emerged a year later under the ownership of private-equity firm Carlyle, Bloomberg says. KEY PLASTICS: Case Summary & 30 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Key Plastics LLC aka Key Plastics Technology, LLC 21700 Haggerty Road, Suite 100 Northville, MI 48167 Bankruptcy Case No.: 08-13326 Debtor-affiliates filing separate Chapter 11 petitions: Entity Case No. ------ -------- Key Plastics Finance Corp. 08-13324 Related Information: The Debtors supply plastic components to the automotive industry. The Debtors have 24 manufacturing facilities located in the United States, Canada, Mexico, Germany, Portugal, Spain, the Czech Republic, France, Slovakia, Italy and China. According to Bloomberg News, the company filed for bankruptcy in March 23, 2000, in Detroit and emerged a year later under the ownership of private-equity firm Carlyle, Bloomberg says. See: http://www.keyplastics.com/ Chapter 11 Petition Date: December 15, 2008 Court: District of Delaware (Delaware) Judge: Mary F. Walrath Debtors' Counsel: Mark D. Collins, Esq. collins@RLF.com Richards Layton & Finger PA One Rodney Square P.O. Box 551 Wilmington, DE 19899 Tel: (302) 651-7700 Fax: (302) 651-7701 Estimated Assets: $100 million to $500 million Estimated Debts: $100 million to $500 million The petition was signed by senior vice president and chief financial officer John Wilson. The Debtors' Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ BASF Corporation trade $1,412,113 Attn: John Byrd 100 Campus Drive Florham Park, NJ 07932 Tel: (248) 641-1820 Fax: (248) 641-7370 Jing Mei Automotive trade $1,315,844 (USA) Inc. Attn: Bob Boyd 10415 United Parkway Schiller Parkway, IL 60176 Tel: (248) 703-7270 Fax: (847) 617-5311 Basilius Tool Company trade $478,975 Attn: Scott Basilius 4338 South Avenue Toledo, OH 43615 Tel: (419) 536-5810 Fax: (419) 536-0391 Phillips Sumika trade $353,913 Rhodia Polyamide Corp. trade $167,065 Zatkoff Seals and Packings trade $125,787 Polyone Corporation trade $124,496 Rhetech Inc. trade $124,331 Perot Systems trade $109,810 Tek-Cast Inc. trade $104,673 BDO Seidman LLP trade $101,282 DTE Energy trade $90,377 Commercial Spring and trade $83,568 Tool Deco' Plate trade $72,123 Dynacast Canada trade $68,849 Dixon Tool Co. Ltd. trade $68,800 Luck Marr trade $63,032 Madison Tool Inc. trade $63,023 Packaging Specialties trade $57,400 Specialty Industries Inc. trade $49,841 Elite Welding & Fabricating trade $49,235 Rich Industries Inc. trade $47,689 American Electric Power trade $43,208 LyondellBasell Advanced trade $41,702 Epic Equipment & Engineering trade $41,400 Lightning Components & Design trade $39,385 Washington Penn Plastic Co. trade $38,759 JTEKT Automotive trade $38,397 Fastco Industries Inc. trade $37,075 Foster Electric America trade $35,120 KRISPY KREME: Posts $5.9MM Net Loss in Quarter Ended November 2 --------------------------------------------------------------- Krispy Kreme Doughnuts Inc. posted a net loss of $5.9 million for the three months ended November 2, 2008, compared to a net loss of $798,000 for the three months ended October 28, 2007. Krispy Kreme also expects that franchisees will close more stores in the future, and that the number of those closures may be significant. Franchisees opened 96 stores and closed 30 stores in the first nine months of fiscal 2009, including 37 and 19 stores, respectively, in the third quarter. Three Months Ended November 2008 Systemwide sales for the third quarter of fiscal 2009 decreased approximately 1.0% compared to the third quarter of fiscal 2008, reflecting an 19.0% decrease in average weekly sales per store, partially offset by a 22.1% increase in store operating weeks. The systemwide sales decrease reflects an 11.1% decrease in Company Stores sales from the prior year quarter, partially offset by a 5.5% increase in franchise store sales. The total number of factory stores at the end of the third quarter of fiscal 2009 was 284, consisting of 86 Company stores and 198 franchise stores. Satellite stores made up 44% of the total systemwide store count as of November 2, 2008, compared to 31% at October 28, 2007. Systemwide average weekly sales per store are lower than Company average weekly sales per store principally because satellite stores, which generally have lower average weekly sales than factory stores, are operated almost exclusively by franchisees. In addition, the increasing percentage of total stores which are satellite stores has the effect of reducing the overall systemwide average weekly sales per store. On a same store basis, systemwide on-premises sales decreased 11.8% in the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008. Revenues Total revenues decreased 8.7% to $94.3 million for the three months ended November 2, 2008, from $103.4 million for the three months ended October 28, 2007. This decrease was comprised of an 11.1% decrease in Company Stores revenues to $64.7 million, a 12.6% increase in Franchise revenues to $6.4 million, and a 6.6% decrease in KK Supply Chain revenues to $23.2 million. Direct Operating Expenses Direct operating expenses, which exclude depreciation and amortization expense, were 92.4% of revenues in the third quarter of fiscal 2009 compared to 88.0% of revenues in the third quarter of fiscal 2008. General and Administrative Expenses General and administrative expenses increased to $5.8 million, or 6.2% of total revenues, in the third quarter of fiscal 2009 from $5.7 million, or 5.5% of total revenues, in the third quarter of fiscal 2008. The increase in general and administrative expenses as a percentage of total revenues principally reflects the fixed nature of many of these expenses on a lower revenue base. General and administrative expenses include professional fees and expenses related to the investigations and securities litigation to the consolidated financial statements included elsewhere herein, totaling approximately $160,000 in the third quarter of both fiscal 2009 and fiscal 2008. Such professional fees and expenses include amounts advanced to certain former officers of the company pursuant to the indemnification obligations. Depreciation and Amortization Expense Depreciation and amortization expense decreased to $2.1 million, or 2.2% of total revenues, in the third quarter of fiscal 2009 from $4.9 million, or 4.7% of total revenues, in the third quarter of fiscal 2008. The decline in depreciation and amortization expense is attributable to the reduction in the number of company factory stores operating in the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008 and to a lower depreciable base of property and equipment resulting from asset dispositions and impairment writedowns. Additionally, depreciation and amortization expense decreased in the third quarter of fiscal 2009 compared to the third quarter of fiscal 2008 as a result of the company's divestiture in January 2008 of its manufacturing and distribution facility in Effingham, Illinois. Interest Income Interest income decreased to $65,000 in the third quarter of fiscal 2009 from $379,000 in the third quarter of fiscal 2008 primarily due to lower short-term interest rates. Interest Expense Interest expense increased to $3.0 million in the third quarter of fiscal 2009 from $2.3 million in the third quarter of fiscal 2008. Interest accruing on outstanding indebtedness was lower in the third quarter of fiscal 2009 than in the third quarter of fiscal 2008 principally resulting from the reduction in outstanding debt since the third quarter of fiscal 2008. This lower interest on outstanding indebtedness was largely offset by higher lender margin resulting from the amendments to the company's 2007 Secured Credit Facilities. Interest expense for the third quarter of fiscal 2009 reflects a non-cash charge of $582,000 resulting from marking to market the company's liabilities related to interest rate derivatives. As more fully described in Note 5 to the consolidated financial statements appearing elsewhere herein, effective April 9, 2008, the company discontinued hedge accounting for these derivatives as a result of amendments to its credit facilities. As a consequence of the discontinuance of hedge accounting, changes in the fair value of the derivative contracts subsequent to April 8, 2008, are reflected in earnings as they occur. Amounts included in accumulated other comprehensive income related to changes in the fair value of the derivative contracts for periods prior to April 9, 2008, are being charged to earnings through April 2010 when the underlying hedged transactions (interest expense on long-term debt) affect earnings. As of November 2, 2008, the fair value of the derivative liability was approximately $1.6 million, which is included in accrued liabilities in the accompanying consolidated balance sheet. Accumulated other comprehensive income as of November 2, 2008, includes an accumulated loss related to these derivatives of approximately $1.0 million (net of income taxes of approximately $600,000). Interest expense for the three months ended November 2, 2008 includes approximately $320,000 of amortization of this accumulated loss. Other Non-Operating Income and Expense Other non-operating income and expense for the three months ended November 2, 2008, includes a charge of $900,000 to establish a reserve for collectability risk on a note receivable from an Equity Method Franchisee. Other non-operating income and expense for the three months ended October 28, 2007, includes an impairment charge of approximately $550,000 to reduce the carrying value of the company's investment in an Equity Method Franchisee to its estimated fair value, as well as a gain of approximately $260,000 resulting from the receipt of additional proceeds from the prior sale of another Equity Method Franchisee. Provision for Income Taxes The provision for income taxes was $404,000 in the third quarter of fiscal 2009 compared to $376,000 in the third quarter of fiscal 2008. Each of these amounts includes adjustments to the valuation allowance for deferred income tax assets to maintain such allowance at an amount sufficient to reduce the company's aggregate net deferred income tax assets to zero, as well as a provision for income taxes estimated to be payable currently. Nine Months Ended November 2008 Systemwide sales for the first nine months of fiscal 2009 increased approximately 1.8% compared to the first nine months of fiscal 2008, reflecting a 17.5% increase in store operating weeks, partially offset by a 13.5% decrease in average weekly sales per store. The systemwide sales increase reflects a 10.6% increase in franchise store sales, partially offset by an 11.6% decrease in Company Stores sales from the first nine months of the prior year. The total number of factory stores at the end of the first nine months of fiscal 2009 was 284, consisting of 86 Company stores and 198 franchise stores. Satellite stores made up 44% of the total systemwide store count as of November 2, 2008, compared to 31% at October 28, 2007. On a same store basis, systemwide on-premises sales decreased 8.3% in the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008. Revenues Total revenues decreased 8.2% to $292.2 million for the nine months ended November 2, 2008, from $318.4 million for the nine months ended October 28, 2007. This decrease was comprised of an 11.6% decrease in Company Stores revenues to $202.0 million, a 23.8% increase in Franchise revenues to $19.5 million, and a 4.5% decrease in KK Supply Chain revenues to $70.7 million. Direct Operating Expenses Direct operating expenses, which exclude depreciation and amortization expense, were 90.7% of revenues in the first nine months of fiscal 2009 compared to 89.0% of revenues in the first nine months of fiscal 2008. General and Administrative Expenses General and administrative expenses decreased to $17.4 million, or 6.0% of total revenues, in the first nine months of fiscal 2009 from $19.4 million, or 6.1% of total revenues, in the first nine months of fiscal 2008. The decrease in general and administrative expenses reflects a decrease in share-based compensation expense of approximately $1.4 million due principally to executive officer turnover resulting in the forfeiture of stock and option awards, and an out of period credit of approximately $600,000 recorded in the second quarter of fiscal 2009 related to the company's self- insured worker's compensation program. In addition, the decrease in general and administrative expenses reflects a net decrease in professional fees of approximately $1.2 million. The decrease in professional fees reflects the remediation of material weaknesses in internal control over financial reporting and the resulting reduction in consulting fees, reduced use of consultants generally, and lower outside legal fees. The net reduction in professional fees reflects an increase in professional fees and expenses related to the investigations and securities litigation to the consolidated financial statements included elsewhere herein, which totaled approximately $1.1 million in the first nine months of fiscal 2009 compared to $1.0 million in the first nine months of fiscal 2008. Such professional fees and expenses include amounts advanced to certain former officers of the company pursuant to the indemnification obligations. These decreases in general and administrative expenses were partially offset by a charge of approximately $600,000 for vacation and other time off pay resulting from policy changes to enhance these employee benefits. Depreciation and Amortization Expense Depreciation and amortization expense decreased to $6.6 million, or 2.3% of total revenues, for the first nine months of fiscal 2009 from $13.6 million, or 4.3% of total revenues, for the first nine months of fiscal 2008. The decline in depreciation and amortization expense is attributable principally to the reduction in the number of company factory stores operating in the first nine months of fiscal 2009 compared to the first nine months of fiscal 2008 and to a lower depreciable base of property and equipment resulting from asset dispositions and impairment writedowns. Interest Income Interest income decreased to $287,000 in the first nine months of fiscal 2009 from $1.2 million in the first nine months of fiscal 2008 primarily due to lower short term interest rates. Interest Expense Interest expense decreased to $7.3 million in the first nine months of fiscal 2009 from $7.4 million in the first nine months of fiscal 2008. Interest accruing on outstanding indebtedness was lower in the first nine months of fiscal 2009 than in the first nine months of fiscal 2008 principally because of the reduction in outstanding debt since the first quarter of fiscal 2008. This lower interest on outstanding indebtedness was largely offset by higher lender margin on fees resulting from the amendments to the company's 2007 Secured Credit Facilities. In the first nine months of fiscal 2009, the company charged to interest expense approximately $260,000 of fees and expenses associated with the amendments to the company's credit facilities, and wrote off to interest expense approximately $290,000 of unamortized debt issuance costs associated with the reduction in the size of the company's revolving credit facility from $50 million to $30 million. Loss on Extinguishment of Debt During the first nine months of fiscal 2008, the company closed the 2007 Secured Credit Facilities and used the proceeds to retire other indebtedness. The company recorded a loss on extinguishment of debt of approximately $9.6 million, consisting of a $4.1 million prepayment fee related to the other indebtedness and a $5.5 million write-off of unamortized deferred financing costs related to that debt. Equity in Losses of Equity Method Franchisees Equity in losses of equity method franchisees totaled $685,000 in the first nine months of fiscal 2009 compared to $695,000 for the first nine months of fiscal 2008. This caption represents the company's share of operating results of unconsolidated franchisees which develop and operate Krispy Kreme stores. Other Non-Operating Income and Expense Other non-operating income and expense in the first nine months of fiscal 2009 includes a non-cash gain of $931,000 on the disposal of an investment in an Equity Method Franchisee, largely offset by a $900,000 charge for collectability risk on a note receivable from another Equity Method Franchisee. Other non-operating income and expense for the first nine months of fiscal 2008 includes an impairment charge of approximately $550,000 to reduce the carrying value of the company's investment in an Equity Method Franchisee to its estimated fair value, partially offset by a gain of approximately $260,000 resulting from the receipt of additional proceeds from the prior sale of another Equity Method Franchisee. Net Loss The company reported a net loss of $3.8 million for the nine months ended November 2, 2008, compared to a net loss of $35.2 million for the nine months ended October 28, 2007. KRISPY KREME DOUGHNUTS, INC. Consolidated Balance Sheet (Unaudited) Nov. 2, Feb. 3, 2008 2008 (In thousands) ASSETS CURRENT ASSETS: Cash and cash Equivalents $ 32,175 $ 24,735 Receivables 21,289 22,991 Accounts and notes receivable - equity method franchisees 1,017 2,637 Inventories 17,865 19,987 Deferred income taxes 83 83 Other current assets 5,699 5,647 Total current assets 78,128 76,080 Property and equipment 86,762 90,996 Investments in equity method franchisees 1,563 1,950 Goodwill and other intangible assets 23,856 23,856 Other assets 9,831 9,469 Total assets $ 200,140 $ 202,351 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 1,480 $ 1,557 Accounts payable 8,289 5,712 Accrued liabilities 31,270 35,949 Total current liabilities 41,039 43,218 Long-term debt, less current maturities 73,694 75,156 Deferred income taxes 83 83 Other long-term Obligations 26,725 27,270 Commitments and contingencies SHAREHOLDERS' EQUITY: Preferred stock, no par value - - Common stock, no par Value 360,912 355,615 Accumulated other comprehensive income 517 81 Accumulated deficit (302,830) (299,072) Total shareholders' Equity 58,599 56,624 Total liabilities and Shareholders' equity $ 200,140 $ 202,351 About Krispy Kreme Headquartered in Winston-Salem, North Carolina, Krispy Kreme Doughnuts Inc. (NYSE: KKD) -- http://www.KrispyKreme.com/-- is a retailer and wholesaler of doughnuts. The company's principal business, which began in 1937, is owning and franchising Krispy Kreme doughnut stores where over 20 varieties of doughnuts are made, sold and distributed and where a broad array of coffees and other beverages are offered. As of Aug. 3, 2008, there were 494 Krispy Kreme stores operated systemwide in the United States, Australia, Canada, Hong Kong, Indonesia, Japan, Kuwait, Mexico, the Philippines, Puerto Rico, Qatar, Saudi Arabia, South Korea, the United Arab Emirates and the United Kingdom, of which 100 were owned by the company and 394 were owned by franchisees. Of the 494 stores, 286 were factory stores and 208 were satellites; 234 stores were located in the United States and 260 were located in other countries. * * * Standard & Poor's placed Krispy Kreme Doughnuts Inc.'s long term foreign and local issuer credit ratings at 'B-' in September 2007. The ratings still hold to date with a negative outlook. LANDAMERICA FINANCIAL: Amends Stock Buy Agreement W/ Fidelity ------------------------------------------------------------- Fidelity National Financial, Inc., reported the signing of an amended stock purchase agreement with LandAmerica Financial Group, Inc., pursuant to which FNF will acquire LFG's two principal title insurance underwriters, Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation, as well as United Capital Title Insurance Company. The total purchase price for Commonwealth and Lawyers is approximately $282 million. Chicago Title Insurance Company and Fidelity National Title Insurance Company will pay a total of approximately $135 million in cash to LFG. Additionally, FNF will pay LFG a total consideration of approximately $147 million consisting of $47 million in cash, a $50 million subordinated note due in 2013, with interest at the 5-year treasury rate at closing plus 1% and approximately $50 million in FNF common stock valued at no less than $14.00 per share. The agreement calls for Fidelity National Title's cash purchase of United for statutory book value at closing. United Capital's statutory book value was approximately $16 million as of Sept. 30, 2008. The agreement is subject to certain closing conditions and regulatory approvals, including the entry of final approved orders by the Chapter 11 court, Hart Scott Rodino approval and the receipt of Form A approvals from applicable state insurance regulators. The stock purchase agreement is subject to termination by FNF if the closing of Commonwealth and Lawyers does not take place on or before Dec. 22, 2008. The United Capital purchase is expected to close in the first quarter of 2009. About Fidelity National Fidelity National Financial, Inc. -- http://www.fnf.com-- provides title insurance, specialty insurance, claims management services, and information services. FNF is one of the nation's largest title insurance companies through its title insurance underwriters -- Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title -- that issue approximately 27 percent of all title insurance policies in the United States. FNF also provides flood insurance, personal lines insurance and home warranty insurance through its specialty insurance business. FNF also is a leading provider of outsourced claims management services to large corporate and public sector entities through its minority-owned subsidiary, Sedgwick CMS. FNF is also a leading information services company in the human resource, retail and transportation markets through another minority-owned subsidiary, Ceridian Corporation. About LandAmerica Financial LandAmerica Financial Group, Inc. is a leading provider of real estate transaction services with offices nationwide and a vast network of active agents. LandAmerica serves its agent, residential, commercial and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe and Asia. LandAmerica Financial Group and its affiliate LandAmerica 1031 Exchange Services, Inc. filed for Chapter 11 protection Nov. 26, 2008 (Bankr. E. D. Virginia, Lead Case No. 08-35994). Dion W. Hayes, Esq., and John H. Maddock III, Esq., at McGuireWoods LLP, are the Debtors' bankruptcy counsel. In its bankruptcy petition, LFG listed total assets of $3,325,100,000, and total debts of $2,839,800,000 as of Sept. 30, 2008. (LandAmerica Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). LANDSBANKI ISLAND: Luxembourg Bank Unit to Be Liquidated -------------------------------------------------------- Stephanie Bodoni of Bloomberg News reports that Luxembourg court ordered to liquidate Landsbanki Luxembourg SA, unit of Landsbanki Island hf. Luxembourg's financial regulators, Mr. Bodoni says, said in a statement that the order follows the bank's request two months ago for a suspension of payments. The Commission de Surveillance du Secteur Financier took control of the Luxembourg unit on Oct. 8, 2008, Mr. Bodoni says. Headquartered in Reykjavik, Iceland, Landsbanki Islands hf. -- http://www.landsbanki.is/-- is a financial institution. The Bank filed for Chapter 15 protection on Dec. 9, 2008 (Bankr. S.D. N.Y. Case No.: 08-14921). Gary S. Lee, Esq., at Morrison & Foerster LLP, represents the Debtor. When it filed for protection from its creditors, it listed assets and debts of more than $1 billion each. LEAR CORPORATION: Moody's Lowers Corporate Family Rating to 'B3' ---------------------------------------------------------------- Moody's Investors Service lowered the Corporate Family and Probability of Default ratings of Lear Corporation, to B3 from B2. In a related action, the rating of the senior secured term loan was lowered to B2 from B1. The rating on the senior unsecured notes was affirmed at B3. The ratings remain on review for further possible downgrade. The lowering of Lear's Corporate Family Rating to B3 reflects sustained lower North American production levels at the Detroit-3 automobile manufacturers and the likelihood of further production declines going into 2009. Lower production volumes by European automobile manufactures are also expected to continue into 2009. The erosion of demand has resulted in sharply weaker earnings and cash flow at Lear, and absent a clear view of potential financial performance in 2008, the company has withdrawn its guidance. While Lear's financial metrics for the LTM period ending 9/30/08 included EBIT/Interest of 2.6x and debt/EBITDA of 3.4x (calculated using Moody's standard adjustments), the trend in performance through the year has weakened, and for the most recent quarter the company reported an operating loss. Lear has taken initiatives to reduce operating costs and improve efficiency, but with further production cuts at automotive OEM's the prospects for near term stabilization of operating performance seem limited. Lear also has significant operating exposure to the Detroit-3 auto makers, and potential financial restructurings or bankruptcy filings by one or more of those companies could create further operating disruptions for the company. Moody's review will assess the expected deterioration in Lear's credit metrics over the near term resulting from North American and European production pressures, and the eroded financial condition of the North American operations of the Detroit-3. Moody's will also consider the fact that while Lear has successfully implemented restructuring programs in the past, the current industry environment continues to evolve, posing additional execution risk. Lear's Speculative Grade Liquidity rating of SGL-3 indicates adequate liquidity over the next twelve months. At September 27, 2008, Lear's principal liquidity sources included cash balances of approximately $523 million, most of the cash is located internationally. In addition, the company's has a Euro 315 million factoring facility which expires in April 2011 ($233 million was outstanding at September 27, 2008) and a $1.29 billion revolving credit facility. Approximately $822 million of the revolving credit facility matures in January 2012; while approximately $468 million is due in March 2010. In October 2008, the company drew $400 million under the revolving credit facilities to protect against credit market disruptions. There are also about $61 million of letters of credit outstanding. Lear currently has ample room under the credit facility's covenants with leverage and interest ratios of 2.54 times and 4.07 times compared to the covenant thresholds of 3.5 times and 2.75 times, respectively. However, the combination of current industry OEM production pressures, which are expected to continue into 2009, and the tightening of these covenants over the near-term are expected to reduce the company's covenant cushions. The bank debt is secured by the capital stock of all the company's domestic subsidiaries and a portion of the first tier foreign subsidiaries, and certain domestic assets subject to the 10% lien limitation within the company's bond indentures. Above these levels collateral must be shared with the bonds. Moody's expects Lear's ability to generate positive free cash flow over the next twelve months to be challenged by the current industry environment. Ratings Lowered: -- Corporate Family Rating, to B3 from B2 -- Probability of Default, to B3 from B2 -- Senior Secured Term Loan, to B2 (LGD3, 42%) from B1 (LGD3, 42%) Ratings Affirmed: -- Senior Unsecured Notes, B3 (LGD4, 58%) -- SGL-3 Speculative Grade Liquidity Rating The last rating action was on October 14, 2008 when Lear's Corporate Family Rating was affirmed and the Outlook changed to Negative. Lear Corporation, headquartered in Southfield, Michigan, is focused on providing complete seat systems, electrical distribution systems and various electronic products to major automotive manufacturers across the world. The company had revenue of $16.0 billion in 2007 and employed approximately 91,000 employees in 34 countries. Following the disposition of its interior business, Lear expects its ongoing revenues to approximate $14.0 billion. LEHMAN BROTHERS: Fitch Withdraws D Long-Term Issuer Default Rating ------------------------------------------------------------------ Fitch Ratings has withdrawn the long-term Issuer Default Rating and counterparty rating of Lehman Brothers Financial Products Inc. These ratings were downgraded to 'D' and 'B/RR1', respectively, on Oct. 6, 2008 following a voluntary bankruptcy filing on Oct. 5, 2008. The bankruptcy filings of its parent, Lehman Brothers Holdings Inc. and affiliate Lehman Brothers Special Finance should have resulted in the transfer of LDFP's derivatives portfolio to its contingent manager. These filings did not give counterparties the right to terminate transactions with LBFP. However, this right became available when LBFP filed for bankruptcy protection. A number of counterparties have since exercised this right. As a result of the bankruptcy, an administrator has been appointed and is overseeing the termination or novation of all existing trades. Any required distributions will be satisfied with capital on hand, which has historically exceeded prescribed levels. The complete wind-down of the trading portfolio may take several months to occur. During this time, Fitch does not believe that sufficient financial and transaction information will be available to maintain ratings and is now withdrawing coverage. These ratings are withdrawn: Lehman Brothers Financial Products Inc. --Long-term IDR 'D'; --Counterparty Rating 'B'. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. LEHMAN BROTHERS: Jarden Wants to Oust Lehman Unit as Loan Agent --------------------------------------------------------------- Bloomberg News' Bill Rochelle reports that consumer products maker Jarden Corp. has asked the U.S. Bankruptcy Court for the Southern District of New York to enter an order ousting a Lehman Brothers Holdings Inc. subsidiary as the administrative agent on its $1.53 billion lending package. Jarden says Lehman has failed to make loans when requested. The Bankruptcy Court will convene a hearing on Jan. 14 to consider the request. At the same hearing, the James Giddens, trustee appointed by the Securities Investor Protection Corp. to liquidate Lehman's brokerage subsidiary, Lehman Brothers Inc., will ask the bankruptcy judge for authority to issue summonses to witnesses in his investigation who don't appear voluntarily, Bloomberg adds. About Lehman Brothers Lehman Brothers Holdings Inc. -- http://www.lehman.com-- is the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Through its team of more than 25,000 employees, Lehman Brothers offers a full array of financial services in equity and fixed income sales, trading and research, investment banking, asset management, private investment management and private equity. Its worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by a network of offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. The firm, through predecessor entities, was founded in 1850. Lehman filed for chapter 11 bankruptcy Sept. 15, 2008 (Bankr. S.D.N.Y. Case No.: 08-13555). Lehman's bankruptcy petition listed $639 billion in assets and $613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. Subsidiary LB 745 LLC, submitted a Chapter 11 petition on Sept. 16 (Case No. 08-13600). Several other affiliates followed thereafter. The Debtors' bankruptcy cases are handled by Judge James M. Peck. Harvey R. Miller, Esq., Richard P. Krasnow, Esq., Lori R. Fife, Esq., Shai Y. Waisman, Esq., and Jacqueline Marcus, Esq., at Weil, Gotshal & Manges, LLP, in New York, represent Lehman. Epiq Bankruptcy Solutions serves as claims and noticing agent. On Sept. 19, 2008, the Honorable Gerard E. Lynch, Judge of the United States District Court for the Southern District of New York, entered an order commencing liquidation of Lehman Brothers, Inc., pursuant to the provisions of the Securities Investor Protection Act in the case captioned Securities Investor Protection Corporation v. Lehman Brothers Inc., Case No. 08-CIV- 8119 (GEL). James W. Giddens has been appointed as trustee for the SIPA liquidation of the business of LBI Barclays Bank Plc has agreed, subject to U.S. Court and relevant regulatory approvals, to acquire Lehman Brothers' North American investment banking and capital markets operations and supporting infrastructure for US$1.75 billion. Nomura Holdings Inc., the largest brokerage house in Japan, on Sept. 22 reached an agreement to purchased Lehman Brothers Holdings, Inc.'s operations in Europe and the Middle East less than 24 hours after it reached a deal to buy Lehman's operations in the Asia Pacific for US$225 million. Nomura paid only $2 dollars for Lehman's investment banking and equities businesses in Europe, but agreed to retain most of Lehman's employees. International Operations Collapse Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. These are currently the only UK incorporated companies in administration. Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, have been appointed as joint administrators to Lehman Brothers International (Europe) on Sept. 15, 2008. The joint administrators have been appointed to wind down the business. Lehman Brothers Japan Inc. and Lehman Brothers Holdings Japan Inc. filed for bankruptcy in the Tokyo District Court on Sept. 16. The two units of Lehman Brothers Holdings, Inc., which has filed for bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, have combined liabilities of JPY4 trillion -- US$38 billion). Lehman Brothers Japan Inc. reported about JPY3.4 trillion (US$33 billion) in liabilities in its petition. Akio Katsuragi, a former Morgan Stanley executive, runs Lehman's Japan units. Lehman Brothers Asia Limited, Lehman Brothers Securities Asia Limited and Lehman Brothers Futures Asia Limited have suspended its operations with immediate effect, including ceasing to trade on the Hong Kong Securities Exchange and Hong Kong Futures Exchange, until further notice. The Asian units' asset management company, Lehman Brothers Asset Management Limited, will continue to operate on a business as usual basis. A further notice concerning the retail structured products issued by or arranged by any Lehman Brothers group company will be issued as soon as possible, a press statement said. (Lehman Brothers Bankruptcy News; Bankruptcy Creditors' Service, Inc., <http://bankrupt.com/newsstand/>or 215/945-7000). LENNAR CORPORATION: Fitch Lowers Issuer Default Rating to 'BB+' --------------------------------------------------------------- Fitch Ratings has downgraded Lennar Corp.'s Issuer Default Ratings and outstanding debt ratings: -- IDR to 'BB+' from 'BBB-'; -- Senior unsecured to 'BB+' from 'BBB-'; -- Unsecured bank credit facility to 'BB+' from 'BBB-'; -- Short Term IDR from 'F3' to 'B'; -- Commercial Paper from 'F3' to 'B'. The Rating Outlook remains Negative. The downgrade reflects the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect further deterioration in LEN's credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. However, LEN's liquidity position provides a buffer and supports the new ratings. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. LEN's ratings reflect the company's strong track record over many decades and through many past homebuilding cycles, management's sound operating and financial policies, the company's well positioned, low-basis land holdings in attractive growth markets, and its capacity to withstand a meaningful housing downturn. The rating also considers the off-balance sheet financing of its longer-dated land supply and the concentration of deliveries in Florida, Texas and California (the three largest state markets in the country). Fitch views LEN's partnerships and joint ventures to be strategically and financially material to the company's operations. However, the manageable leverage levels and the extensive supply of lots in long-term land-constrained markets held in the partnerships mitigate this risk to some extent. Furthermore, LEN has reduced its recourse joint venture debt from $1.8 billion at the end of its 2006 fiscal year to $629 million at the end of its 2008 third quarter. LEN has also committed to further reduce exposure (through quarterly reductions) to recourse debt related to joint ventures to $275 million through the maturity of its revolving credit facility in July 2011 and is so far ahead of schedule. LEN's liquidity remains healthy and provides flexibility. As of Aug. 31, 2008, LEN had $857 million of cash on the balance sheet and approximately $800 million of unborrowed capacity under its recently amended $1.1 billion unsecured revolving credit facility. In November 2008, LEN amended its unsecured revolving credit facility that, among other things, reduced the total commitment from $1.5 billion to $1.1 billion, modified the tangible net worth and leverage requirements, modified certain borrowing base advances and extended the quarterly reductions in the company's recourse JV obligations through the maturity date of the credit facility. The facility is scheduled to mature in July 2011. LEN controls roughly a 7.1-year supply of land based on latest 12 months home deliveries, 58.5% of which are owned, 11.3% are controlled through options, and 30.2% are controlled through joint ventures. (The options share of total lots controlled is down sharply over the past two years as the company has written off substantial numbers of options.) LEVEL 3 COMMUNICATIONS: CEO J. Storey Gets President and COO Posts ------------------------------------------------------------------ Level 3 Communications, Inc. board of directors has elected Jeff K. Storey as the company's president and chief operating officer, effective Dec. 8, 2008. Mr. Storey will report to James Q. Crowe, the company's chief executive officer. In connection with the election of Mr. Storey as president, Mr. Crowe will relinquish that title, but remain the company's chief executive officer. From December 2005 until May 2008, Mr. Storey, was president - Leucadia Telecommunications Group of Leucadia National Corporation, where he directed and managed Leucadia's investments in telecommunications companies. Prior to that, beginning in October 2002 Mr. Storey was president and chief executive officer of WilTel Communications Group, LLC until its sale to the company in December 2005. Prior to this position, Mr. Storey was senior vice president and chief operations officer, Network for Williams Communications, Inc., where he had responsibility for all areas of operations for the company's communications network, including planning, engineering, field operations, service delivery and network management. In addition to receiving base salary, Mr. Storey will receive awards pursuant to the company's existing outperform stock appreciation rights program and existing restricted stock unit program. Mr. Storey will also participate in the company's existing discretionary bonus program. In connection with his joining the company, Mr. Storey will receive a one time grant of 400,000 restricted stock units, 100% of the restrictions on which will lapse on the third anniversary of the date of grant. On Dec. 8, 2008, the company disclosed that it will initiate a workforce reduction of approximately 450 employees in North America, approximately 8% of its total employee base. The reduction will take place before the end of December 2008 and will result in a restructuring charge of approximately $12 million to $15 million in the fourth quarter 2008. The reductions were made across multiple levels in the organization and multiple locations in North America only. About Level 3 Communications Headquartered in Broomfield, Colorado, Level 3 Communications Inc. (Nasdaq: LVLT) -- http://www.level3.com/-- is a provider of fiber-based communications services. Level 3 offers a portfolio of metro and long haul services over an end-to-end fiber network, including transport, data, Internet, content delivery and voice. Level 3 Communications Inc. posted $4 million in net losses on $902 million in net revenues for the third quarter ended Sept. 30, 2008, compared with $23 million in net profit on $765 million in net revenues for same period ended Sept. 30, 2007. The company posted $19 million in net losses on $2.58 billion in net revenues for the nine months ended Sept. 30, 2008, compared with $22 million in net profit on $2.1 billion in net revenues for same period ended Sept. 30, 2007. * * * As reported in the Troubled Company Reporter on Nov. 26, 2008, Moody's Investors Service downgraded Level 3 Communications, Inc.'s probability of default rating to Ca from Caa1 in response to the company's Nov. 17 announcement that it had reached an agreement to raise $400 million in new convertible subordinated debt, the proceeds of which, together with cash on hand, will be used to fund discounted tender offers for three existing convertible debt issues that mature in 2009 and 2010. LEVEL 3 COMMUNICATIONS: President and Fairfax Fin. Disclose Stake ----------------------------------------------------------------- Jeffrey K. Storey, president and COO of Level 3 Communications Inc. disclosed in a regulatory filing with the Securities and Exchange Commission that he may be deemed to directly own 400,000 shares of the company's common stock. In a separate filing, Fairfax Financial Holdings Ltd., 10% owner of the company, also disclosed that it may be deemed to indirectly own 139,276,421 shares of the company's common stock. It also added that it indirectly owns 29,499,749 shares of 9% Convertible Senior Discount Notes due 2013. A full-text copy of Fairfax Financial's Form 3 filing is available for free at http://ResearchArchives.com/t/s?3632 Level 3 Communications Inc.'s outstanding shares of common stock, as of Oct. 31, 2008, were 1,611,053,938. About Level 3 Communications Headquartered in Broomfield, Colorado, Level 3 Communications Inc. (Nasdaq: LVLT) -- http://www.level3.com/-- is a provider of fiber-based communications services. Level 3 offers a portfolio of metro and long haul services over an end-to-end fiber network, including transport, data, Internet, content delivery and voice. At Sept. 30, 2008, the company's balance sheet showed total assets of $9.73 billion, total liabilities of $8.93 billion and stockholders' equity of about $803 million. For three months ended Sept. 30, 2008, the company reported net loss of $120.00 million compared to net loss of $174.00 million for the same period in the previous year. For nine months ended Sept. 30, 2008, the company reported net loss of $334.00 million compared to net loss of $1.02 billion for the same period in the previous year. * * * As reported in the Troubled Company Reporter on Nov. 26, 2008, Moody's Investors Service downgraded Level 3 Communications, Inc.'s probability of default rating to Ca from Caa1 in response to the company's Nov. 17 announcement that it had reached an agreement to raise $400 million in new convertible subordinated debt, the proceeds of which, together with cash on hand, will be used to fund discounted tender offers for three existing convertible debt issues that mature in 2009 and 2010. LEVEL 3 COMMUNICATIONS: Directors Sell, Purchase Shares of Stock ---------------------------------------------------------------- Walter Scott, Jr., director of Level 3 Communications Inc., disclosed in a filing with the Securities and Exchange Commission that he has sold 1,514,840 shares of the company's common stock purchase warrant on Dec. 5, 2008. After the transaction, he said that he no longer owns any shares of the company's common stock purchase warrant. Douglas C. Eby, director of the company, disclosed in a separate filing with the SEC that he has sold 559,300 shares of the company's common stock at $0.8114. After the transaction, he may be deemed to directly own 93,270 shares of common stock. Robert E. Julian, a director of the company, also disclosed that he acquired 3761 shares of 6% Convertible Subordinated Notes due 2010. After the transaction, Mr. Julian may be deemed to beneficially own 1,400 shares. Level 3 Communications Inc.'s outstanding shares of common stock, as of Oct. 31, 2008, were 1,611,053,938. About Level 3 Communications Headquartered in Broomfield, Colorado, Level 3 Communications Inc. (Nasdaq: LVLT) -- http://www.level3.com/-- is a provider of fiber-based communications services. Level 3 offers a portfolio of metro and long haul services over an end-to-end fiber network, including transport, data, Internet, content delivery and voice. At Sept. 30, 2008, the company's balance sheet showed total assets of $9.73 billion, total liabilities of $8.93 billion and stockholders' equity of about $803 million. For three months ended Sept. 30, 2008, the company reported net loss of $120.00 million compared to net liss of $174.00 million for the same period in the previous year. For nine months ended Sept. 30, 2008, the company reported net loss of $334.00 million compared to net loss of $1.02 billion for the same period in the previous year. * * * As reported in the Troubled Company Reporter on Nov. 26, 2008, Moody's Investors Service downgraded Level 3 Communications, Inc.'s probability of default rating to Ca from Caa1 in response to the company's Nov. 17 announcement that it had reached an agreement to raise $400 million in new convertible subordinated debt, the proceeds of which, together with cash on hand, will be used to fund discounted tender offers for three existing convertible debt issues that mature in 2009 and 2010. LINEAR TECHNOLOGY: Capital World Discloses 11% Equity Stake ----------------------------------------------------------- Capital World Investors disclosed in a regulatory filing with the Securities and Exchange Commission that it may be deemed to beneficially own 24,533,900 shares or 11.0% of Linear Technology Corporation's common stock. Linear Technology Corporation's shares outstanding at Oct. 24, 2008, $0.001 par value per share were 221,729,262. A full-text copy of the Schedule 13G is available for free at http://ResearchArchives.com/t/s?3641 Headquartered in Milpitas, California, Linear Technology Corporation (NasdaqGS: LLTC) -- http://www.linear.com/-- is a manufacturer of linear integrated circuits. Linear Technology products include high performance amplifiers, comparators, voltage references, monolithic filters, linear regulators, DC-DC converters, battery chargers, data converters, communications interface circuits, RF signal conditioning circuits, uModule(TM) products, and many other analog functions. Applications for Linear Technology' high performance circuits include telecommunications, cellular telephones, networking products such as optical switches, notebook and desktop computers, computer peripherals, video/multimedia, industrial instrumentation, security monitoring devices, high-end consumer products such as digital cameras and MP3 players, complex medical devices, automotive electronics, factory automation, process control, and military and space systems. For three months ended Sept. 30, 2008, the company reported net income of $107,609,000 compared with net income of $91,475,000 for the same period in the previous year. At Sept. 30, 2008, the company's balance sheet showed total assets of $1,664,873,000 and total liabilities of 2,042,809,000, resulting in a stockholders' deficit of $377,936,000. LINEAR TECHNOLOGY: Board OKs Amendment of Robert Swanson Deal ------------------------------------------------------------- The Compensation Committee of the Linear Technology Corporation's board of directors authorized and approved the amendment of Robert Swanson's employment agreement for compliance with Section 409A of the Internal Revenue Code. Mr. Swanson will continue to serve as executive chairman of the board. Section 409A requires that certain nonqualified deferred compensation arrangements meet certain requirements and imposes an additional tax and penalties on service providers, including employees and directors, if a covered arrangement does not comply with Section 409A. The amendments approved by the Compensation Committee generally affect the timing, but not the amount, of compensation that could be received, the definition of certain payment triggers and other technical changes. A full-text copy of the second amended and restated employment agreement is available for free at http://ResearchArchives.com/t/s?3640 Headquartered in Milpitas, California, Linear Technology Corporation (NasdaqGS: LLTC) -- http://www.linear.com/-- is a manufacturer of linear integrated circuits. Linear Technology products include high performance amplifiers, comparators, voltage references, monolithic filters, linear regulators, DC-DC converters, battery chargers, data converters, communications interface circuits, RF signal conditioning circuits, uModule(TM) products, and many other analog functions. Applications for Linear Technology' high performance circuits include telecommunications, cellular telephones, networking products such as optical switches, notebook and desktop computers, computer peripherals, video/multimedia, industrial instrumentation, security monitoring devices, high-end consumer products such as digital cameras and MP3 players, complex medical devices, automotive electronics, factory automation, process control, and military and space systems. For three months ended Sept. 30, 2008, the company reported net income of $107,609,000 compared with net income of $91,475,000 for the same period in the previous year. At Sept. 30, 2008, the company's balance sheet showed total assets of $1,664,873,000 and total liabilities of 2,042,809,000, resulting in a stockholders' deficit of $377,936,000. M/I HOMES: Fitch Downgrades Issuer Default Rating to 'B' -------------------------------------------------------- Fitch Ratings has downgraded M/I Homes, Inc.'s Issuer Default Ratings and outstanding debt ratings: -- IDR to 'B' from 'B+'; -- Senior unsecured debt to 'B+/RR3' from 'BB-/RR2'; -- Series A non-cumulative perpetual preferred stock to 'CCC/RR6' from 'CCC+/RR6'. The Rating Outlook remains Negative. The 'RR3' Recovery Rating on MHO's senior unsecured debt, including its unsecured revolving credit facility, indicates good recovery prospects for holders of this debt issue. MHO's exposure to claims made pursuant to performance bonds and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. The 'RR6' on MHO's preferred stock indicates poor recovery prospects in a default scenario. Fitch applied a liquidation value analysis for these RRs. The downgrade reflects the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect negative trends in MHO's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. Future ratings and outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. MHO maintains an approximate 4.4 year supply of total lots controlled, based on trailing 12 months deliveries, and 3.7 years of owned land. Total lots controlled were 11,156 at Sept. 30, 2008, 85.4% of which are owned, and the balance is controlled through options. Historically, MHO developed about 80% of its communities from which it sells product, resulting in inventory turns that were moderately below average as compared to its public peers. MHO has been cash flow positive in each of the last eight quarters and has generated $254.7 million of cash from operations during the last twelve months. As a result, MHO has reduced its debt from $696 million at Sept. 30, 2006 to $215 million at Sept. 30, 2008, a $481 million reduction. MHO also expects to receive a tax refund of approximately $40 million in early 2009. At the end of March 2008, MHO had no borrowings and $141.6 million of availability under its $250 million revolving credit facility. In March 2008, MHO amended its revolving credit facility to, among other things, reduce the aggregate commitment from $500 million to $250 million and modify the tangible net worth and interest coverage covenants. At Sept. 30, 2008, MHO was in compliance with all of its financial covenants under the revolving credit facility. M/I Homes has a $69.5 million cushion under its TNW requirement, currently its most restrictive covenant. MHO's revolving credit facility matures in October 2010. MHO does not have any major debt maturities until 2012, when $200 million of senior notes become due. MANCHESTER INC: Pre-Emergence Stock Cancelled; Now Privately Owned ------------------------------------------------------------------ All old common stock of Manchester Inc. that was outstanding at the time it filed for bankruptcy on Feb. 7, 2008, has been canceled, extinguished and terminated as of June 23, 2008. The company is now privately owned by Palm Beach Multi-Strategy Fund LLC. The Debtor's old common stock does not represent equity thus the stock has no value and should not be traded. Manchester nka as Navigator Holdings LLC and its subsidiaries, emerged from Chapter 11 bankruptcy protection effective as of June 23, 2008. Pursuant to the terms of the confirmed Chapter 11 Plan, Manchester's senior lender, Palm Beach Multi-Strategy Fund, LLC now owns 100% of the new stock in the Company. The Manchester Chapter 11 Plan embodies a global settlement of all disputes among Manchester, its former directors and officers, and Palm Beach. Pursuant to the Plan, Palm Beach received all of the equity in the reorganized Company in exchange for a cancellation of the debt owing to Palm Beach from Manchester. In addition, Palm Beach contributed a total of $3.7 million to be used to pay claims and to fund the operations of a litigation trust, which will pursue claims against third parties and distribute the proceeds to creditors. In exchange, Palm Beach, the Debtors, and their respective officers and directors exchanged global releases of any and all claims and causes between and among them. The company, as restructured, continues to operate as a going concern, without interruption to operations. The Company has repositioned itself in the independent automobile marketplace as an independent dealer group, providing point of sales financing through its captive finance company. About Navigator Holdings LLC Navigator Holdings LLC owns and operates eight independent automobile dealerships (Navigator Dealer Group LLC) and a captive finance company (Navigator Acceptance LLC). The company's dealerships specialize in selling transportation and utility vehicles and are located throughout the states of Georgia and Indiana. In addition to selling cars and assisting consumers in obtaining bank financing through normal financing channels, Navigator Acceptance specializes in providing financing directly to those consumers with other-than-prime credit. About Manchester Based in Dallas, Texas, Manchester Inc. (OTCBB: MNCS) -- http://www.manchesterinc.net/-- is in the Buy-Here/Pay-Here auto business. Buy-Here/Pay-Here dealerships sell and finance used cars to individuals with limited credit histories or past credit problems, generally financing sales contacts ranging from 24 to 48 months. It operates six automotive sales lots, which focus on the Buy-Here/Pay-Here segment of the used car market. The company and its seven affiliates filed for chapter 11 protection on Feb. 7, 2008 (Bankr. N.D. Tex. Case No.08-30703). Winston & Strawn LLP represents the Debtors in their restructuring efforts. Eric A. Liepins, Esq., is the Debtors' local counsel. The U.S. Trustee for Region 6 appointed creditors to serve on an Official Committee of Unsecured Creditors in these cases. Powell Goldstein LLP represents the Committee as counsel. As of the Debtors' bankruptcy filing, it listed total assets of $131,582,157 and total debts of $123,881,668. MARVEL ENTERTAINMENT: Settlement Agreement with Perelman Approved ----------------------------------------------------------------- The U.S. Bankruptcy Court for the District of Delaware has approved the settlement agreement between Marvel Entertainment Group, Inc. and Ronald Perelman, chairman of Revlon, Inc. Mr. Perelman is the former chairman of the Marvel Entertainment. Mafco Holdings, now known as MacAndrews & Forbes Holdings Inc., which is controlled by Mr. Perelman, will pay $80 million to resolve a long-running dispute with the trustees of the company. According to The Deal, the comic book publisher first filed the suit against Mr. Perelman and his related companies on Oct. 30, 1997, claiming they had breached their fiduciary duty when they reaped $553.5 million in dividends from three bond sales by various Marvel parents in 1993 and 1994. Marvel filed for bankruptcy on Dec. 27, 2006. The company emerged from bankruptcy in 1998. MAFCO Litigation Trust was formed during Marvel's bankruptcy to pursue the claims of unsecured creditors and shareholders. The Trust expects to distribute approximately $50 million to the beneficiaries of the MAFCO Litigation Trust, which include holders of Allowed Unsecured Claims and Allowed Equity Interests. The holders of the Allowed Equity Interests were shareholders of Marvel Entertainment Group, Inc., as of Oct. 1, 1998. Copies of the Settlement Notice, and also the Plan, the MAFCO Litigation Trust Agreement, the list of Beneficiaries to whom the Settlement Notice was mailed, and other materials concerning the Trust and the settlement can be obtained at: http://www.mafcosettlement.com/ Beneficiaries who did not receive the settlement notice in the mail, but whose name appears on the beneficiary list on the Trust Website, must provide the Trust with their current contact information in a properly notarized writing in order to receive a distribution from the Trust. Beneficiaries who did not receive the settlement notice in the mail, and whose name does not appear on the beneficiary list, must provide the Trust with their current contact information and documentation of their status as a beneficiary in a properly notarized writing in order to receive a distribution from the Trust. Letters are to be sent to this address: Friedman Kaplan Sellar & Adelman LLP Attn: Daniel B. Rapport 1633 Broadway, 46th Floor, New York NY 10019 About Revlon Inc. Headquartered in New York City, Revlon Inc. (NYSE: REV) -- http://www.revloninc.com/-- is a worldwide cosmetics, hair color, beauty tools, fragrances, skincare, anti- perspirants/deodorants and personal care products company. The company's brands, which are sold worldwide, include Revlon(R), Almay(R), Mitchum(R), Charlie(R), Gatineau(R) and Ultima II(R). At Sept. 30, 2008, the company's consolidated balance sheet showed $876.6 million in total assets and $1.88 billion in total liabilities, resulting in a $999.3 million stockholders' deficit. About Marvel Entertainment With a library of over 5,000 characters built over more than sixty years of comic book publishing, Marvel Entertainment, Inc. -- http://www.marvel.com/-- is one of the world's most prominent character-based entertainment companies. Marvel utilizes its character franchises in licensing, entertainment (via Marvel Studios) and publishing (via Marvel Comics), with emphasis on feature films, home DVD, consumer products, video games, action figures and role-playing toys, television and promotions. Marvel's strategy is to leverage its franchises in a growing array of opportunities around the world. Marvel filed for chapter 11 bankruptcy on Dec. 27, 1996 (Bankr. D. Del.), in order to implement a proposed $525 million recapitalization. Marvel's filing did not include Marvel's Panini subsidiary, which is headquartered in Italy. In conjunction with the chapter 11 filing, a bank group led by Chase Manhattan Bank has agreed to provide Marvel with $100 million of debtor-in- possession financing. Marvel's plan of reorganization was consummated on Oct. 18, 1998. The plan of reorganization for Marvel Entertainment Group was confirmed on July 31, 1998 by the Court. Pursuant to the plan, MEG Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of the company, merged with and into Marvel, with Marvel continuing as the surviving corporation and as a wholly- owned subsidiary of the registrant. As a result of the merger, the company acquired all of the tangible and intangible assets of Marvel. MAXTOR CORP: S&P Cuts Senior Unsecured Rating to 'B' ---------------------------------------------------- Standard & Poor's Ratings Services lowered the senior unsecured ratings on Seagate Technology HDD Holdings to 'BB-' from 'BB+' and revised the recovery rating on those issues to '3', indicating meaningful recovery (50%-70%) in the event of a payment default, from '4'. At the same time, S&P lowered the senior unsecured rating on Maxtor Corp. to 'B' from 'BB+' and revised the recovery rating to '6', indicating negligible recovery (0-10%) in the event of a payment default, from '4'. The action follows the company's announcement that it expects revenues to decline sequentially in a 14%-24% range in the December quarter and that operating results will be lower than previously expected. "The drop in earnings will pressure the company's net debt-to-EBITDA measure, which is used in a performance covenant in the company's $500 million revolving credit facility," explained S&P's credit analyst Lucy Patricola. The covenant calls for a minimum net debt to EBITDA of 1.5x, and while the company currently is comfortably in compliance -- S&P's estimates the ratio at about 0.4x -- the expected weakness in December earnings likely will significantly diminish headroom. "If operating results for the following quarters remain weak," added Ms. Patricola, "meeting the covenant could be a challenge." MERITAGE HOMES: Fitch Affirms Issuer Default Ratings at 'B+' ------------------------------------------------------------ Fitch Ratings has affirmed Meritage Homes Corporation's Issuer Default Rating and outstanding debt ratings: -- IDR at 'B+'; -- Senior unsecured debt at 'BB-/RR3'; -- Senior subordinated debt at 'B-/RR6'. The Rating Outlook remains Negative. The 'RR3' Recovery Rating (RR) on MTH's senior unsecured debt, including its unsecured revolving credit facility, indicates good recovery prospects for holders of this debt issue. MTH's exposure to claims made pursuant to performance bonds and joint venture debt and the possibility that part of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. The 'RR6' on MTH's senior subordinated debt indicates poor recovery prospects in a default scenario. Fitch applied a liquidation value analysis for these RRs. The ratings and Outlook reflect the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings also reflect negative trends in MTH's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. Ratings for MTH are based on the company's conservative land policies and geographic and product line diversity. MTH has been an active consolidator in the homebuilding industry which has led to above average growth during the seven years concluding 2005, but had kept leverage levels somewhat higher than its peers until the past few years. Management has also exhibited an ability to quickly and successfully integrate its acquisitions. In any case, now that MTH has reached current scale there may be relatively less use of acquisitions going forward and acquisitions are likely to be smaller relative to the company's current size. MTH's sales are reasonably dispersed among its 12 metropolitan markets within six states. MTH is positioned in six of the ten largest single family markets in the country (Los Angeles, Phoenix/Mesa, Dallas/Ft. Worth, Houston, Las Vegas, Orlando). Typically, about 70-75% of home deliveries are to first and second time trade up buyers, 10-15% to entry level buyers, 5% are to luxury home buyers and 5-10% to active adult (retiree) buyers. MTH employs conservative land and construction strategies. The company typically options or purchases land only after necessary entitlements have been obtained so that development or construction may begin as market conditions dictate. MTH extensively uses lot options. The use of non-specific performance rolling options gives MTH the ability to renegotiate price/terms or void the option which limits down side risk in market downturns and provides the opportunity to hold land with minimal investment. As of Sept. 30, 2008, 56% of its lots were controlled through options - a higher percentage than almost all other public builders. Total lots, including those owned, were approximately 20,738 at Sept. 30, 2008. This represents a 3.3 year supply of total lots controlled and 1.4 year supply of owned land based on trailing 12 months deliveries. MTH has ample liquidity with $338 million of borrowing capacity, including $119 million of cash, under its $500 million revolving credit facility which matures in May 2011. In July 2008, the company amended its revolving credit facility to, among other things, reduce the aggregate commitment from $800 million to $500 and modify the tangible net worth, leverage and interest coverage requirements. At Sept. 30, 2008, MTH was in compliance with all the financial covenants under its revolving credit facility. Meritage has a $194.6 million cushion under its TNW requirement, currently its most restrictive covenant. MERVYN'S LLC: Proposes Feb. 18 as Administrative Claims Bar Date ---------------------------------------------------------------- Mervyn's LLC and its affiliated debtors ask the U.S. Bankruptcy Court for the District of Delaware to set February 18, 2009, at 6:00 p.m. as bar date for filing proofs of claim for administrative claims against the Debtors arising during the postpetition period and approving the Debtors' proposed form and manner of notice of the postpetition Bar Date. The Court earlier entered an order establishing bar dates for filing proofs of claim with respect to prepetition claims. The Debtors relate that numerous motions have been filed with respect to postpetition administrative claims. According to the Debtors, they will continue to work on reconciling the asserted administrative claims with their books and records. Christopher M. Samis, Esq., at Richards, Layton & Finger, P.A., in Wilmington, Delaware, relates rather than attempting to address Motions by similarly situated creditors individually, the Debtors propose to establish a process and initial deadline for administrative claims so that they may be resolved in an organized fashion, giving the Debtors time to reconcile the claims with their books and records. Proofs of administrative claim must be timely submitted to: Mervyns Claims Processing c/o Kurtzman Carson Consultants LLC 2335 Alaska Avenue El Segundo, California 90245 A full-text copy of the Proposed Postpetition Bar Date Notice is available for free at: http://bankrupt.com/misc/Mervyns_PostpetitionBarDateNotice.pdf About Mervyn's LLC Headquartered in the San Francisco Bay Area, Mervyn's LLC -- http://www.mervyns.com/-- provides a mix of top national brands and exclusive private labels. Mervyn's has 176 locations in seven states. Mervyn's stores have an average of 80,000 retail square feet, smaller than most other mid-tier retailers and easier to shop, and are located primarily in regional malls, community shopping centers, and freestanding sites. The company and its affiliates filed for Chapter 11 protection on July 29, 2008, (Bankr. D. Del. Lead Case No.: 08-11586). Howard S. Beltzer, Esq., and Wendy S. Walker, Esq., at Morgan Lewis & Bockius LLP, and Mark D. Collins, Esq., Daniel J. DeFranceschi, Esq., Christopher M. Samis, Esq. and L. Katherine Good, Esq., at Richards Layton & Finger P.A., represent the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC is the Debtors' claims agent. The Debtors' financial advisor is Miller Buckfire & Co. LLC. Mervyn's LLC's balance sheet at Aug. 30, 2008, showed $665,493,000 in total assets and $717,160,000 in total liabilities resulting in a $51,667,000 total stockholders' deficit. (Mervyn's Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) MERVYN'S LLC: Seeks to Hire Streambank as IP Consultant ------------------------------------------------------- Mervny's LLC and its affiliated debtors seek authority from the U.S. Bankruptcy Court for the District of Delaware to employ Streambank LLC to provide intellectual property disposition services nunc pro tunc to November 14, 2008. The Debtors seek to engage Streambank to: (a) assess their intellectual property, including, reviewing trademark files, design guidelines, product images, logos and art, and supporting assets; and (b) actively market their intellectual property and, subject to Court approval, conduct a sales process aimed at maximizing the value of the assets for the Debtors and its creditor constituents. The Debtors reserve their right to expand the services to be provided by Streambank. The Debtors propose to pay Streambank: (i) a management fee of $60,000 payable in six monthly installments of $10,000, nunc pro tunc to the entry of the Court's order; and (ii) to the extent that the sale of the Debtors' intellectual property yields an amount in excess of $60,000, a Seller's fee in accordance with this schedule: (a) 15% of Gross Consideration for amounts between $60,000 and $1,810,000; (b) 20% of Gross Consideration for amounts between $1,810,000 and $3,560,000; and (c) 25% of Gross Consideration for amounts exceeding $3,560,000. The Management Fee, the Debtors note, exclude any out-of-pocket expenses incurred by Streambank. The Debtors relate that Streambank will develop a proposed budget for expenses to be incurred and may augment the budget with their consent. The Debtors will also reimburse Streambank for expenses incurred subject to the Court's approval. Gabriel Fried, a principal of Streambank LLC, assures the Court that his firm is a "disinterested person" as that term is defined in Section 101(14) of the Bankruptcy Code, as modified by Section 1107(b). About Mervyn's LLC Headquartered in the San Francisco Bay Area, Mervyn's LLC -- http://www.mervyns.com/-- provides a mix of top national brands and exclusive private labels. Mervyn's has 176 locations in seven states. Mervyn's stores have an average of 80,000 retail square feet, smaller than most other mid-tier retailers and easier to shop, and are located primarily in regional malls, community shopping centers, and freestanding sites. The company and its affiliates filed for Chapter 11 protection on July 29, 2008, (Bankr. D. Del. Lead Case No.: 08-11586). Howard S. Beltzer, Esq., and Wendy S. Walker, Esq., at Morgan Lewis & Bockius LLP, and Mark D. Collins, Esq., Daniel J. DeFranceschi, Esq., Christopher M. Samis, Esq. and L. Katherine Good, Esq., at Richards Layton & Finger P.A., represent the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC is the Debtors' claims agent. The Debtors' financial advisor is Miller Buckfire & Co. LLC. Mervyn's LLC's balance sheet at Aug. 30, 2008, showed $665,493,000 in total assets and $717,160,000 in total liabilities resulting in a $51,667,000 total stockholders' deficit. (Mervyn's Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) MERVYN'S LCC: Former Employees Sue to Recover ERISA Benefits ------------------------------------------------------------ Michelle Diaz, Patty Pine, and Yasmin Zialcita, on behalf of themselves and 520 other similarly situated, filed an adversary complaint against Mervyn's LLC and its affiliated Debtors to recover damages equivalent to 60 days' pay and ERISA benefits by reason of the Debtors' violation of their rights under the Worker Adjustment and Restraining Notification Act. The plaintiffs filed the lawsuit as an adversary proceeding before the U.S. Bankruptcy Court for the District of Delaware. Ms. Diaz, et al., were employees of the Debtors who were terminated as a result of a mass layoff. James E. Huggett, Esq., at Margolis Edelstein, in Wilmington, Delaware, says the Plaintiffs and other class members constitute a class within the meaning of Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure. According to Mr. Huggett, the Debtors failed to pay the Plaintiffs and the other Class members their wages, salary, commission, bonuses, accrued holiday pay and accrued vacation for 60 working days following their terminations and failed to (i) make the pension and 401(k) contributions, (ii) provide other employees benefits under ERISA and (iii) pay their medical expenses for 60 calendar days from and after the dates of their terminations. Mr. Huggett avers the Class is so numerous as to render joinder of all members impracticable in that there are some 520 members of the class. Moreover, Mr. Huggett notes, the Class also meets the requirements of Civil Rule 23(b)(1)(B) because adjudications with respect to individual members of the Class would, as a practical matter, be dispositive of the interest of the other members of the Class not parties to the adjudications or substantially impair or impede their ability to protect their interest. Mr. Huggett adds that the Class meets the requirements of Civil Rule 23(b)(3) because the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Accordingly, Ms. Diaz, et al, ask the Court to: (a) allow their administrative claim for unpaid wages, salaries, commissions, bonuses, vacation pay and other ERISA benefits; (b) certify that they constitute a single class; (c) appoint Margolis Edelstein as counsel; (d) appoint Michelle Diaz, Patty Pine, and Yasmin Zialcita as Class Representatives; and (e) allow their administrative priority claims for reasonable attorneys' fees and the costs and disbursements that they incur in prosecuting the action. About Mervyn's LLC Headquartered in the San Francisco Bay Area, Mervyn's LLC -- http://www.mervyns.com/-- provides a mix of top national brands and exclusive private labels. Mervyn's has 176 locations in seven states. Mervyn's stores have an average of 80,000 retail square feet, smaller than most other mid-tier retailers and easier to shop, and are located primarily in regional malls, community shopping centers, and freestanding sites. The company and its affiliates filed for Chapter 11 protection on July 29, 2008, (Bankr. D. Del. Lead Case No.: 08-11586). Howard S. Beltzer, Esq., and Wendy S. Walker, Esq., at Morgan Lewis & Bockius LLP, and Mark D. Collins, Esq., Daniel J. DeFranceschi, Esq., Christopher M. Samis, Esq. and L. Katherine Good, Esq., at Richards Layton & Finger P.A., represent the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC is the Debtors' claims agent. The Debtors' financial advisor is Miller Buckfire & Co. LLC. Mervyn's LLC's balance sheet at Aug. 30, 2008, showed $665,493,000 in total assets and $717,160,000 in total liabilities resulting in a $51,667,000 total stockholders' deficit. (Mervyn's Bankruptcy News, Issue No. 12; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000) MERYVN'S LLC: New Retailers Acquire 22 Macerich-Owned Sites ----------------------------------------------------------- Macerich(R) said that 22 of 41 Macerich-owned Mervyns LLC sites acquired in December 2007 and first Quarter 2008 will go to retailers Forever 21 or Kohl's, pending approval by the United States Bankruptcy Court for the District of Delaware overseeing Mervyns bankruptcy proceedings. Forever 21 will be taking 12 of the spaces and Kohl's will be taking 10. Macerich also said that it closed on a seven-year, $250 million loan on Washington Square Mall in Portland, Oregon. The loan has a fixed interest rate of 6.00%. The transaction generated proceeds to Macerich above the prior loan of approximately $63 million. The completion of the Washington Square financing brings the financing activity completed by Macerich in 2008 to 13 transactions with its pro rata share of those loans totaling nearly $1.3 billion. The remaining 2009 maturities, excluding extensions and loan commitments, are only $525 million. Forever 21 and Kohl's prevailed in the auction of Mervyns leaseholds held Dec. 10, 2008, a preliminary step leading to final court approval of new lessees for Macerich-owned Mervyns sites, which is expected within the month. Of the 22 locations, eight are in Macerich-owned shopping centers. "The strong interest in these locations from popular and well- positioned retailers Forever 21 and Kohl's underscores the inherent value of this retail real estate," said Tony Grossi, Senior Executive Vice President and COO of Macerich. "This response at auction sends a powerful message about the long- term vibrancy of high-quality shopping center properties, and these dynamic brands will only add to their financial performance and shopper appeal." "We look forward to gaining control of our remaining 19 Mervyns locations by second quarter 2009, when we will reach out to the retailers that have expressed strong interest in these attractive locations," said Mr. Grossi. Both Forever 21 and Kohl's are pursuing aggressive schedules, with space build out beginning as early as January; the new stores are expected to open throughout 2009. "The current scenario is one we planned for, among others, when we acquired the Mervyns sites last year," said Mr. Grossi. "Our company has an excellent track record of recycling anchor spaces, as we did successfully with the Federated locations we acquired in 2006. We've added appreciable value every time." Forever 21 and Kohl's are strong, growing players in the current retail landscape. "This is a smart strategic move for our company," said Christopher Lee, Senior Vice President, Forever 21. "The opportunity to assume 12 outstanding, large-format spaces in key shopping centers in the West works beautifully with our plans for growth. In this economic environment, we also are especially pleased to help preserve retail jobs in these markets. " Macerich purchased 39 Mervyns sites in December 2007 and two sites in first quarter 2008 to gain long-term control of well-positioned retail real estate -- both in its own centers and in other properties. Forever 21 is taking space at the following Macerich centers: Arrowhead Towne Center in Glendale, AZ; Lakewood Center Mall in Lakewood, CA; Los Cerritos Center in Cerritos, CA; Montebello Town Center in Montebello, CA; South Towne Center in Sandy, UT; and The Mall of Victor Valley in Victorville, CA. Locations not in Macerich-owned centers are: Cottonwood Mall in Albuquerque, NM; Mall Del Norte in Laredo, TX; Santa Fe Place in Santa Fe, NM; Tucson Mall in Tucson, AZ; Crossroads Plaza in Calexico, CA; and Valle Vista Mall in Harlingen, TX. Kohl's is taking space at the following Macerich centers: Northgate in San Rafael, CA, and Stonewood Center in Downey, CA. Locations not in Macerich-owned centers are: Bayshore Mall in Eureka, CA; Brickyard Plaza in Salt Lake City, UT; Huntington Oaks Shopping Center in Monrovia, CA; Southland Mall in Hayward, CA; The Galleria at South Bay in Redondo Beach, CA; the Galleria at Sunset in Henderson, NV; Whittwood Town Center in Whittier, CA; and Zinfandel Square in Rancho Cordova, CA. Additionally, two Mervyns locations located at Macerich centers but not owned by Macerich, will gain Mervyns replacements -- Kohl's at Capitola Mall in Capitola, CA, and Forever 21 at Northridge Mall in Salinas, CA. About Mervyn's LLC Headquartered in the San Francisco Bay Area, Mervyn's LLC -- http://www.mervyns.com/-- provides a mix of top national brands and exclusive private labels. Mervyn's has 176 locations in seven states. Mervyn's stores have an average of 80,000 retail square feet, smaller than most other mid-tier retailers and easier to shop, and are located primarily in regional malls, community shopping centers, and freestanding sites. The company and its affiliates filed for Chapter 11 protection on July 29, 2008, (Bankr. D. Del. Lead Case No.: 08-11586). Howard S. Beltzer, Esq., and Wendy S. Walker, Esq., at Morgan Lewis & Bockius LLP, and Mark D. Collins, Esq., Daniel J. DeFranceschi, Esq., Christopher M. Samis, Esq. and L. Katherine Good, Esq., at Richards Layton & Finger P.A., represent the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC is the Debtors' claims agent. The Debtors' financial advisor is Miller Buckfire & Co. LLC. Mervyn's LLC's balance sheet at Aug. 30, 2008, showed $665,493,000 in total assets and $717,160,000 in total liabilities resulting in a $51,667,000 total stockholders' deficit. MESA ROYALTY: NYSE Extends Trustee's 10-K Filing until April 15 --------------------------------------------------------------- New York Stock Exchange, Inc., approved the second request of The Bank of New York Mellon Trust Company, N.A., the Trustee of Mesa Royalty Trust, for an additional trading period, giving the Trust until April 15, 2009, to complete and file the 2007 Form 10-K, subject to reassessment on an ongoing basis. On Nov. 26, 2008, The BoNY Mellon submitted to the NYSE a second request for an additional six-month trading period in light of the Trust's failure to file its annual report on Form 10-K for the period ending Dec. 31, 2007. The Trust failed to file its 2007 Form 10-K timely pursuant to Section 203.01 (Reporting Financial Information to Shareholders) of the NYSE's Listed Company Manual and, as a result, is subject to the procedures under Section 802.01E (SEC Annual Report Timely Filing Criteria) of the NYSE's Listed Company Manual. The Trust was originally granted an additional trading period on Oct. 16, 2008, giving the Trust until Dec. 1, 2008, to complete and file the 2007 Form 10-K, subject to reassessment on an ongoing basis and compliance with the milestones and timing outlined in the request for the additional six-month trading period. The Trust's units remain listed on the NYSE under the symbol MTR, but have been assigned a ".LF" indicator by the NYSE to signify that the Trust is on the "late filer" list. The Trust will remain on the late filer list until such time as the Trust is current with all of its periodic reports filed with the Securities and Exchange Commission. Although the Trust intends to cure the deficiencies and to return to compliance with the NYSE continued listing requirements, there can be no assurance that it will be able to do so. In the event that the Trust is unable to return to compliance with the NYSE continued listing requirements by April 15, 2009, the NYSE will move forward with the initiation of suspension and delisting procedures. The Trust is awaiting the completion of reserve information by the Trust's independent reserve engineer, and the Trustee intends to complete the audited financial statements for the year ended December 31, 2007 and to file the 2007 Form 10-K soon as possible after receipt of this information. About Mesa Royalty Trust Headquartered in Austin, Texas, Mesa Royalty Trust (NYSE:MTR) was established when Mesa Petroleum Co. conveyed to the Trust a 90% net profits overriding royalty interest in certain producing oil and gas properties located in the Hugoton field of Kansas, the San Juan Basin field of New Mexico and Colorado, and the Yellow Creek field of Wyoming. The Bank of New York Trust Company, N.A. is the Trustee of the trust. MGM MIRAGE: Will Sell Treasure Island Hotel to Ruffin for $775MM ---------------------------------------------------------------- MGM MIRAGE and Ruffin Acquisition, LLC, have entered into an agreement whereby MGM MIRAGE, through its wholly-owned subsidiary The Mirage Casino-Hotel, will sell Treasure Island Hotel & Casino (TI) to Ruffin Acquisition for $775 million. Ruffin Acquisition, LLC is wholly owned by Phil Ruffin. The purchase price is to be paid at closing as: -- $500 million in cash; and -- $275 million in secured notes bearing interest at 10%, with $100 million payable not later than 175 days after closing and $175 million payable not later than 24 months after closing. The notes, to be issued by Ruffin Acquisition, will be secured by the assets of TI and will be senior to any other financing. The transaction is subject to customary closing conditions contained in the purchase agreement, including receipt of necessary regulatory and governmental approvals. The parties expect the transaction to close by the end of the second quarter of 2009. MGM MIRAGE expects to report a substantial gain on the sale. MGM MIRAGE acquired TI as part of the merger between MGM Grand, Inc. and Mirage Resorts, Incorporated in May 2000. "We are extremely proud of the accomplishments of Treasure Island's employees and management team in making it one of the must-see properties in Las Vegas," said James J. Murren, MGM MIRAGE Chairperson and CEO. "We are pleased to have been able to work with Phil Ruffin, a known and trusted community partner. This transaction creates value to our stakeholders through significantly increased liquidity and enhanced financial flexibility." TI is located on the Las Vegas Strip and features 2,885 guest rooms and suites, approximately 90,000 square feet of gaming space, several fine and casual dining outlets, The Sirens of TI -- the iconic pirate battle attraction, and Mystere, the first permanent production in Las Vegas by Cirque du Soleil. "We are very excited to be in a position to acquire such a stellar property in Treasure Island," said Mr. Ruffin. "The property is in pristine condition, ideally located in the heart of the Strip and benefits from a wonderful team of outstanding employees. We are financially positioned to close on this transaction once all of the necessary approvals have been received," Mr. Ruffin added. MGM MIRAGE Forms Global Gaming Division MGM MIRAGE Hospitality, a wholly owned subsidiary of MGM MIRAGE, reported the creation of MGM MIRAGE Global Gaming Development, a new division principally focused on MGM MIRAGE's international gaming expansion into new markets. Lloyd Nathan has been named to lead MGM MIRAGE Global Gaming Development as President. "Lloyd's extensive international gaming development experience, coupled with his strong legal background, make him highly qualified to lead our worldwide gaming expansion efforts," said Gamal Aziz, President and Chief Executive Officer of MGM MIRAGE Hospitality. "MGM MIRAGE is one of the world's premier companies in the gaming industry, with internationally renowned brands. We believe that there are significant opportunities for MGM MIRAGE Hospitality to develop luxury resort properties outside the United States, which will include gaming in appropriate venues," said Mr. Aziz. MGM MIRAGE Hospitality's initial international gaming project is the recently announced MGM Grand Ho Tram in Vietnam, to be owned and developed by Asian Coast Development Ltd. and managed by MGM MIRAGE Hospitality. Mr. Nathan has a significant background in global gaming development. He joined the company in 2002 and most recently served as Executive Vice President and Managing Director of MGM MIRAGE International, based in Hong Kong. Prior to joining MGM MIRAGE, Mr. Nathan had a distinguished career as a practicing attorney specializing in international transactions and as an executive in leisure and technology businesses. Mr. Nathan graduated with Honors from the London School of Economics and The Law Society of England's College of Law. He is an Attorney at Law of the State of California, and a Solicitor of the Supreme Court of England and Wales. About MGM Mirage Headquartered in Las Vegas, Nevada, MGM Mirage (NYSE: MGM) -- http://www.mgmmirage.com/-- is a hotel and gaming company. It owns and operates 17 properties located in Nevada, Mississippi and Michigan, and has investments in three other properties in Nevada, New Jersey and Illinois. * * * As reported in the Troubled Company Reporter on Oct. 9, 2008, Tamara Audi at The Wall Street Journal reports that MGM Mirage needs to raise about $1.2 billion to complete the financing of its CityCenter project in Las Vegas. As reported in the Troubled Company Reporter on Oct. 7, 2008, MGM Mirage said that CityCenter, its joint development project with Dubai World, completed the first phase of its $3.0 billion financing package by securing a $1.8 billion senior bank credit facility. The facility matures in April 2013 and is expected to be increased to a total amount of $3.0 billion as additional commitments are received. CityCenter has received additional signed commitment letters totaling in excess of $500 million, which commitments are expected to be added to the facility once completed. MGM Mirage and Dubai World continue to work with additional lenders and will seek the remaining commitment amounts through a syndication process beginning on Oct. 7, 2008. The gross project budget consists of $9.3 billion of construction costs (including capitalized interest), $1.7 billion of land, $0.2 billion of preopening expenses, and $0.1 billion of intangible assets. CityCenter is scheduled to be completed in December 2009. According to WSJ, MGM Mirage is working to secure 41.2 billion in financing to round out the $3 billion needed to complete the project. Jim Murren, MGM Mirage's chief operating officer and president, said that he hopes to have the remaining funds committed by Oct. 31, WSJ says. As reported in the Troubled Company Reporter on Nov. 3, 2008, Moody's Investors Service downgraded MGM MIRAGE's (MGM) Corporate Family rating and Probability of Default rating to Ba3 from Ba2. Moody's also downgraded MGM's senior unsecured bond rating to Ba3 from Ba2 and its senior subordinated bond rating to B2 from B1. Moody's also assigned a (P)Ba1 provisional rating to the company's proposed benchmark senior secured guaranteed note. All ratings remain on review for further possible downgrade. The company's Speculative Grade Liquidity rating was also downgraded to SGL-4 from SGL-3. As reported in the Troubled Company Reporter on Oct. 31, 2008, Standard & Poor's Ratings Services lowered its corporate credit and issue-level ratings on Las Vegas-based MGM MIRAGE and its subsidiaries by one notch. The corporate credit rating was lowered to 'BB-' from 'BB', and the rating outlook is negative. MERRILL LYNCH: S&P Junks Ratings on 6 Classes From 12 RMBS ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 18 classes of asset-backed certificates from 12 residential mortgage- backed securities transactions backed by U.S. prime jumbo collateral from Merrill Lynch Mortgage Investors Trust and Merrill Lynch Mortgage Investors Inc. Concurrently, S&P affirmed its ratings on the remaining 242 classes from these and 15 other transactions from these issuers. The downgrades reflect the inadequacy of the credit support levels compared with the amount of total delinquencies (30-, 60-, and 90- plus days, foreclosures, and REOs). As of the Oct. 25, 2008, remittance date, total delinquencies, as a percent of the current pool balance, ranged between 1.71% (series 2004-A4) and 10.0% (series 2004-G). The affirmations reflect sufficient credit enhancement available to support the ratings at their current levels. Subordination provides credit support for these transactions. The collateral for these transactions originally consisted primarily of U.S. prime jumbo mortgage loans. Transaction Information ----------------------- (As of the October 2008 remittance) Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2003-A $6,271,187 $5,457,777 Downgraded classes Subordination ------------------ ------------- B-4 $2,141,153 B-5 $1,250,153 Merrill Lynch Mortgage Investors Inc. Series Total delinq. Severe delinq. ------ ------------- -------------- 2003-A2 (Group 1) $996,873 $0 Downgraded classes Subordination ------------------ ------------- I-B-2 $100,954 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- MLCC 2003C $2,830,922 $1,955,947 Downgraded classes Subordination ------------------ ------------- B-5 $673,786 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- MLCC2003-H $4,826,937 $2,483,084 Downgraded classes Subordination ------------------ ------------- B-4 $1,486,442 B-5 $941,850 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2004-A1 $6,219,363 $3,939,709 Downgraded classes Subordination ------------------ ------------- B-1 $1,352,958 B-2 $298,958 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- MLCC2004-A $7,235,754 $4,035,031 Downgraded classes Subordination ------------------ ------------- B-5 $1,653,864 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2004-HB1 $4,122,484 $2,849,062 Downgraded classes Subordination ------------------ ------------- B-5 $645,064 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2004-A2 $4,925,132 $3,535,303 Downgraded classes Subordination ------------------ ------------- M-3 $1,823,775 B-1 $918,775 B-2 $272,775 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2004-A3 $4,905,304 $1,224,934 Downgraded classes Subordination ------------------ ------------- B-2 $397,117 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2004-A4 $4,838,195 $1,614,784 Downgraded classes Subordination ------------------ ------------- B-2 $497,080 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- MLCC2004-F $5,229,811 $3,741,612 Downgraded classes Subordination ------------------ ------------- B-5 $1,412,087 Merrill Lynch Mortgage Investors Trust Series Total delinq. Severe delinq. ------ ------------- -------------- 2004-G $5,995,495 $1,754,227 Downgraded classes Subordination ------------------ ------------- B-4 $979,234 B-5 $416,973 Rating Actions Merrill Lynch Mortgage Investors Trust Series MLCC 2003-A Series 2003-A Rating ------ Class CUSIP To From ----- ----- -- ---- B-4 589929H50 BB BBB- B5 589929H68 B BB- Merrill Lynch Mortgage Investors Inc. Series 2003-A2 Rating ------ Class CUSIP To From ----- ----- -- ---- I-B-2 589929P36 B BB- Merrill Lynch Mortgage Investors Trust Series MLCC 2003C Rating ------ Class CUSIP To From ----- ----- -- ---- B-5 589929T40 B BB- Merrill Lynch Mortgage Investors Trust Series MLCC2003-H Rating ------ Class CUSIP To From ----- ----- -- ---- B-4 5899296Y9 BBB BBB+ B-5 5899296Z6 B B+ Merrill Lynch Mortgage Investors Trust Series 2004-A1 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 59020UAK1 B BB B-2 59020UAL9 CCC B Merrill Lynch Mortgage Investors Trust Series MLCC2004-A Rating ------ Class CUSIP To From ----- ----- -- ---- B-5 59020UBC8 B BB Merrill Lynch Mortgage Investors Trust Series 2004-HB1 Rating ------ Class CUSIP To From ----- ----- -- ---- B-5 59020UFD2 CCC BB- Merrill Lynch Mortgage Investors Trust Series 2004-A2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-3 59020UGZ2 BBB A B-1 59020UHC2 B BB+ B-2 59020UHD0 CCC B Merrill Lynch Mortgage Investors Trust Series 2004-A3 Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 59020UHV0 CCC B Merrill Lynch Mortgage Investors Trust Series 2004-A4 Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 59020ULX1 CCC B Merrill Lynch Mortgage Investors Trust Series MLCC2004-F Rating ------ Class CUSIP To From ----- ----- -- ---- B-5 59020UNK7 B BB+ Merrill Lynch Mortgage Investors Trust Series 2004-G Rating ------ Class CUSIP To From ----- ----- -- ---- B-4 59020UPH2 BB BBB- B-5 59020UPJ8 CCC BB Ratings Affirmed Merrill Lynch Mortgage Investors Inc. Series 1998-GN1 Class CUSIP Rating ----- ----- ------ A 589929PJ1 AAA M-1 589929PK8 AA+ M-2 589929PL6 A Merrill Lynch Mortgage Investors Inc. Series 1998-GN2 Class CUSIP Rating ----- ----- ------ A 589929RH3 AAA M-1 589929RJ9 AA+ M-2 589929RK6 A B 589929RL4 BBB- Merrill Lynch Mortgage Investors Inc. Series 1998-GN3 Class CUSIP Rating ----- ----- ------ A 589929SE9 AAA Merrill Lynch Mortgage Investors Inc. Series 2003-A2 Class CUSIP Rating ----- ----- ------ I-A-1 589929M70 AAA I-A-1-IO 589929M88 AAA II-A-2 589929M96 AAA II-A-2-IO 589929N20 AAA II-A-3 589929N38 AAA II-A-3-IO 589929N46 AAA II-A-4 589929N53 AAA II-A-4-IO 589929N61 AAA I-M-1 589929N79 AA+ I-M-2 589929N87 AA I-M-3 589929N95 A- II-M-1 589929P51 AA+ II-M-2 589929P69 AA- II-M-3 589929P77 BBB+ I-B-1 589929P28 BBB II-B-1 589929P85 BBB- II-B-2 589929P93 B+ Merrill Lynch Mortgage Investors Inc. Series 2003-A4 Class CUSIP Rating ----- ----- ------ I-A 589929W53 AAA II-A 589929W61 AAA III-A 589929W87 AAA IV-4 589929W95 AAA II-A-IO 589929W79 AAA M-1 589929X29 AAA M-2 589929X37 AAA M-3 589929X45 AA+ B-1 589929X86 A B-2 589929X94 B+ Merrill Lynch Mortgage Investors Inc. Series 2003-A5 Class CUSIP Rating ----- ----- ------ I-A 5899293M8 AAA II-A-6 5899293T3 AAA II-A-7 5899293U0 AAA II-A-IO 5899293V8 AAA M-1 5899293W6 AAA M-2 5899293X4 AA M-3 5899293Y2 BBB+ B-1 5899293Z9 BB+ B-2 5899294A3 B+ Merrill Lynch Mortgage Investors Inc. Series 2003-A6 Class CUSIP Rating ----- ----- ------ I-A 5899294G0 AAA II-A 5899294H8 AAA M-1 5899294J4 AA+ M-2 5899294K1 AA- M-3 5899294L9 BBB+ B-1 5899294M7 BBB B-2 5899294N5 BB- Merrill Lynch Mortgage Investors Trust MLMI Series 2004-A3 Series 2004-A3 Class CUSIP Rating ----- ----- ------ I-A 59020UHF5 AAA II-A 59020UHG3 AAA III-A-1 59020UHH1 AAA III-A-2 59020UHJ7 AAA III-A-3 59020UHK4 AAA IV-A-1 59020UHL2 AAA IV-A-2 59020UHM0 AAA IV-A-3 59020UHN8 AAA M-1 59020UHP3 AA M-2 59020UHQ1 A M-3 59020UHR9 BBB B-1 59020UHU2 BB Merrill Lynch Mortgage Investors Trust Series MLCC 2003-A Series 2003-A Class CUSIP Rating ----- ----- ------ 1A 589929F94 AAA 2A-1 589929G28 AAA 2A-2 589929G36 AAA X-1A 589929T65 AAA X-2A1 589929G51 AAA X-2A2 589929G69 AAA X-1B 589929G77 AAA X-2B 589929H84 AAA X-3B 589929H92 AAA B-1 589929G93 AA+ B-2 589929H27 A+ B-3A 589929H35 BBB+ B-3B 589929H43 BBB Merrill Lynch Mortgage Investors Trust Series MLCC 2003-B Series 2003-B Class CUSIP Rating ----- ----- ------ A-1 589929K56 AAA A-2 589929L71 AAA X-A-1 589929K80 AAA X-A-2 589929L89 AAA X-B 589929K98 AAA B-1 589929K64 AA+ B-2 589929K72 AA- B-3 589929L30 A- B-4 589929L48 BBB B-5 589929L55 BB Merrill Lynch Mortgage Investors Trust Series MLCC 2003-C Series MLCC 2003C Class CUSIP Rating ----- ----- ------ A-1 589929S41 AAA A-2 589929T73 AAA X-A-1 589929S58 AAA X-A-3 589929T99 AAA X-B 589929S66 AAA B-1 589929S82 AAA B-2 589929S90 AA- B-3 589929T24 BBB+ B-4 589929T32 BBB- Merrill Lynch Mortgage Investors Trust Series MLCC 2003-D Series 2003-D Class CUSIP Rating ----- ----- ------ A 589929V21 AAA X-A-2 589929W46 AAA X-B 589929V47 AAA B-1 589929V62 AAA B-2 589929V70 AA+ B-3 589929V88 A+ B-4 589929V96 BBB+ B-5 589929W20 BB+ Merrill Lynch Mortgage Investors Trust Series MLCC 2003-E Series 2003-E Class CUSIP Rating ----- ----- ------ A-1 589929Y36 AAA A-2 589929Y44 AAA X-A-2 589929Y85 AAA X-B 589929Y93 AAA B-1 589929Y51 AAA B-2 589929Z27 AA+ B-3 589929Z35 A+ B-4 589929Z43 A- B-5 589929Z50 BBB- Merrill Lynch Mortgage Investors Trust Series MLCC 2003-F Series 2003-F Class CUSIP Rating ----- ----- ------ A-1 5899292M9 AAA A-2 5899292N7 AAA A-3 5899292W7 AAA X-A-2 5899292Q0 AAA X-B 5899292R8 AAA B-1 5899292T4 AAA B-2 5899292U1 AA B-3 5899292V9 A B-4 5899293J5 BBB+ B-5 5899293K2 BB Merrill Lynch Mortgage Investors Trust Series MLCC 2003-G Series MLCC2003-G Class CUSIP Rating ----- ----- ------ A-1 5899295V6 AAA A-2 5899295W4 AAA A-3 5899295X2 AAA A-4A 5899296J2 AAA A-4B 5899296K9 AAA X-A-2 5899295Z7 AAA X-B 5899296A1 AAA B-1 5899296C7 AAA B-3 5899296E3 A B-2 5899296D5 AA B-4 5899296F0 BBB+ B-5 5899296G8 BB Merrill Lynch Mortgage Investors Trust Series MLCC 2003-H Series MLCC2003-H Class CUSIP Rating ----- ----- ------ A-1 5899296M5 AAA A-2 5899296N3 AAA A-3A 5899296P8 AAA A-3B 5899296V5 AAA X-A-2 5899296R4 AAA X-B 5899296X1 AAA B-1 5899296S2 AAA B-2 5899296T0 AA+ B-3 5899296U7 A+ Merrill Lynch Mortgage Investors Trust Series MLCC 2004-A Series MLCC2004-A Class CUSIP Rating ----- ----- ------ A-1 59020UAR6 AAA A-2 59020UAS4 AAA X-A-2 59020UAV7 AAA X-B 59020UAW5 AAA B-1 59020UAX3 AAA B-2 59020UAY1 AA B-3 59020UAZ8 A- B-4 59020UBB0 BBB- Merrill Lynch Mortgage Investors Trust Series MLCC 2004-B Series MLCC2004-B Class CUSIP Rating ----- ----- ------ A-1 59020UBU8 AAA A-2 59020UBV6 AAA A-3 59020UBW4 AAA X-A 59020UBX2 AAA X-B 59020UBZ7 AAA B-1 59020UCB9 AAA B-2 59020UCC7 AA+ B-3 59020UCD5 AA- B-4 59020UCE3 A- B-5 59020UCF0 BB Merrill Lynch Mortgage Investors Trust Series MLCC 2004-C Series MLCC2004-C Class CUSIP Rating ----- ----- ------ A-1 59020UDN2 AAA A-2 59020UDP7 AAA A-2A 59020UDV4 AAA A-2B 59020UDW2 AAA A-3 59020UDQ5 AAA X-A 59020UDR3 AAA X-B 59020UEB7 AAA B-1 59020UDS1 AAA B-2 59020UDT9 AA+ B-3 59020UDU6 A+ B-4 59020UEC5 A- B-5 59020UED3 BB+ Merrill Lynch Mortgage Investors Trust Series MLCC 2004-D Series MLCC2004-D Class CUSIP Rating ----- ----- ------ A-1 59020UGF6 AAA A-2 59020UGG4 AAA A-3 59020UGH2 AAA X-A 59020UGJ8 AAA X-B 59020UGK5 AAA B-1 59020UGM1 AAA B-2 59020UGN9 AA+ B-3 59020UGP4 A+ B-4 59020UGQ2 BBB+ B-5 59020UGR0 BB+ Merrill Lynch Mortgage Investors Trust Series MLCC 2004-E Series 2004-E Class CUSIP Rating ----- ----- ------ A-1 59020UJP1 AAA A-2A 59020UJQ9 AAA A-2B 59020UJR7 AAA A-2C 59020UJS5 AAA A-2D 59020UJT3 AAA X-A 59020UJU0 AAA X-B 59020UJV8 AAA B-1 59020UJX4 AAA B-2 59020UJY2 AA+ B-3 59020UJZ9 A+ B-4 59020UKA2 BBB+ B-5 59020UKB0 BB Merrill Lynch Mortgage Investors Trust Series MLCC 2004-F Series MLCC2004-F Class CUSIP Rating ----- ----- ------ A-1A 59020UMZ5 AAA A-1B 59020UNA9 AAA A-2 59020UNB7 AAA X-A 59020UNC5 AAA X-B 59020UND3 AAA B-1 59020UNF8 AAA B-2 59020UNG6 AA+ B-3 59020UNH4 A+ B-4 59020UNJ0 BBB+ Merrill Lynch Mortgage Investors Trust Series MLCC 2004-G Series 2004-G Class CUSIP Rating ----- ----- ------ A-1 59020UNZ4 AAA A-2 59020UPA7 AAA X-A 59020UPB5 AAA X-B 59020UPG4 AAA B-1 59020UPD1 AA+ B-2 59020UPE9 A+ B-3 59020UPF6 A- Merrill Lynch Mortgage Investors Trust Series MLCC 2004-HB1 Series 2004-HB1 Class CUSIP Rating ----- ----- ------ A-1 59020UET8 AAA A-2 59020UEU5 AAA A-3 59020UEV3 AAA X-A 59020UEW1 AAA X-B 59020UEX9 AAA B-1 59020UEZ4 AA+ B-2 59020UFA8 AA- B-3 59020UFB6 BBB B-4 59020UFC4 BB Merrill Lynch Mortgage Investors Trust Series MLMI 2004-A4 Series 2004-A4 Class CUSIP Rating ----- ----- ------ A-1 59020ULQ6 AAA A-2 59020ULR4 AAA A-3 59020ULS2 AAA M-1 59020ULT0 AA M-2 59020ULU7 A M-3 59020ULV5 BBB B-1 59020ULW3 BB Merrill Lynch Mortgage Investors Trust Series MLMI 2004-A1 Series 2004-A1 Class CUSIP Rating ----- ----- ------ I-A 59020UAA3 AAA II-A-1 59020UAB1 AAA II-A-2 59020UAC9 AAA II-A-IO 59020UAD7 AAA III-A 59020UAE5 AAA IV-A 59020UAF2 AAA M-1 59020UAG0 AA M-2 59020UAH8 A M-3 59020UAJ4 BBB Merrill Lynch Mortgage Investors Trust Series MLMI 2004-A2 Series 2004-A2 Class CUSIP Rating ----- ----- ------ I-A 59020UGT6 AAA II-A-1 59020UGU3 AAA II-A-2 59020UGV1 AAA M-1 59020UGX7 AA+ M-2 59020UGY5 AA II-A-3 59020UGW9 AAA MERRITT FUNDING: Moody's May Further Cut Junk Ratings on 6 Notes ---------------------------------------------------------------- Moody's Investors Service has downgraded and left on review for further possible downgrade the ratings of notes in these transactions: Merritt Funding Trust, Series 2005-2 Class Description US$205,404,000 Class A-2 Floating Rate Senior Secured Notes Due 2016 -- Prior Rating: Aaa, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Aa2, on review for possible downgrade Class Description: US$69,998,000 Class B Floating Rate Secured Deferrable Interest Rate Notes Due 2016 -- Prior Rating: A2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Baa3, on review for possible downgrade Class Description US$20,883,000 Class C Floating Rate Secured Deferrable Interest Rate Notes Due 2016 -- Prior Rating: Baa2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: B1, on review for possible downgrade Class Description: US$30,165,000 Preferred Trust Certificates Due 2016 -- Prior Rating: Ba2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Caa2, on review for possible downgrade GE Commercial Loan Trust, Series 2006-1 Class Description US$281,007,000 Class A-2 Floating Rate Secured Notes, due 2017 -- Prior Rating: Aaa , on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: A3, on review for possible downgrade Class Description: US$100,000,000 Class A-PT Floating Rate Secured Notes, due 2017 -- Prior Rating: Aaa -- Prior Rating Date: April 27, 2006 -- Current Rating: A3, on review for possible downgrade Class Description: US$80,753,000 Class B Floating Rate Secured Deferrable Interest Rate Notes, due 2017 -- Prior Rating: A2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: B1, on review for possible downgrade Class Description US$32,123,000 Class C Floating Rate Secured Deferrable Interest Rate Notes, due 2017 -- Prior Rating: Baa2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Caa1, on review for possible downgrade Class Description: US$37,477,000 Preferred Trust Certificates -- Prior Rating: Ba2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Caa3, on review for possible downgrade GE Commercial Loan Trust, Series 2006-2 Class Description US$291,823,000 Class A-2 Floating Rate Secured Notes, Due 2016 -- Prior Rating: Aaa , on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: A2, on review for possible downgrade Class Description: US$30,849,000 Class B Floating Rate Secured Deferrable Interest Rate Notes, Due 2016 -- Prior Rating: Aa2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Baa1, on review for possible downgrade Class Description US$56,697,000 Class C Floating Rate Secured Deferrable Interest Rate Notes, Due 2016 -- Prior Rating: A2, on review for possible downgrade -- Prior Rating Date: Ocotber 30, 2008 -- Current Rating: Ba3, on review for possible downgrade Class Description: US$47,526,000 Class D Floating Rate Secured Deferrable Interest Rate Notes, Due 2016 -- Prior Rating: Baa3, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: B3, on review for possible downgrade Class Description US$8,337,000 Preferred Trust Certificates, Due 2016 -- Prior Rating: Ba2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Caa3, on review for possible downgrade GE Commercial Loan Trust, Series 2006-3 Class Description US$433,467,000 Class A-1 Floating Rate Secured Notes, Due 2015 -- Prior Rating: Aaa -- Prior Rating Date: September 28, 2006 -- Current Rating: Aa3, on review for possible downgrade Class Description US$352,822,000 Class A-2 Floating Rate Secured Notes, Due 2017 -- Prior Rating: Aaa, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Baa1, on review for possible downgrade Class Description: US$36,826,000 Class B Floating Rate Secured Deferrable Interest Rate Notes, Due 2017 -- Prior Rating: Aa2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Baa3, on review for possible downgrade Class Description US$64,695,000 Class C Floating Rate Secured Deferrable Interest Rate Notes, Due 2017 -- Prior Rating: A2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: B2, on review for possible downgrade Class Description: US$44,789,000 Class D Floating Rate Secured Deferrable Interest Rate Notes, Due 2017 -- Prior Rating: Baa3, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Caa2, on review for possible downgrade Class Description: US$14,431,000 Preferred Trust Certificates -- Prior Rating: Ba2, on review for possible downgrade -- Prior Rating Date: October 30, 2008 -- Current Rating: Caa3, on review for possible downgrade According to Moody's, these rating actions are a result of the risk of par loss due to potential required asset sales. This feature, which is incorporated in all of the above transactions, specifies general conditions under which an issuer is required to sell the underlying loans. Under current market conditions there is an increased potential for such required asset sales, which could have the result of exposing the transactions to elevated levels of loan price volatility. These rating actions reflect Moody's cash flow analysis of the transactions' rated tranches under various scenarios. These scenarios were based on assumptions regarding the amount of loan sales and loan sale prices. The tranches remain on review for possible downgrade due to the risk that loan price volatility will potentially result in further loan sales. MIAMI BEACH: S&P Changes Rating to 'BB' on $268.4 Mil. Bonds ------------------------------------------------------------ Standard & Poor's Ratings Services revised its long-term rating to 'BB' from 'BB+' on Miami Beach Health Facilities Authority, Florida's $268.4 million series 2004, 2001A, and 1998 bonds issued for Mount Sinai Medical Center. In S&P's opinion, Mount Sinai Medical Center's cardiac-related programs have encountered increased competition, diminishing the hospital's financial profile. S&P assigned a negative outlook last year with the expectation that increased operating losses or decreased volumes could result in a lower rating. While the volume trend reversed in 2008, S&P believes operating losses remain significant and 2007 performance was under budget and below S&P's expectations at the time of the last review. Management recruited a new cardiac surgery team that will practice exclusively at Mount Sinai starting this month. While an increase in these more profitable volumes may boost earnings in the future, in S&P's view, the magnitude and persistence of operating losses over the past few years diminished Mount Sinai's financial profile to what S&P considers a 'BB' rating level. In S&P's opinion, the 'BB' rating reflects Mount Sinai's significant operating losses, driven largely by the loss of cardiac volume over the past several years; diminished balance sheet from the losses, but also due to the current investment environment; and continued competitive pressure from suburban- based hospitals, although Mount Sinai remains the only hospital on Miami Beach. S&P's rating outlook remains negative with a further downgrade possible unless Mount Sinai demonstrates what S&P considers a meaningful reduction in its annual operating losses and improved cash flow and debt service coverage. While the foundation and nonoperating earnings have been, in S&P's opinion, strong enough historically to warrant keeping the rating in the 'BB' category, S&P believes that the current economic slump may also pressure the rating over the next several years. If Mount Sinai meets its stated 2009 budget without further liquidity or balance-sheet erosion, it is possible that the outlook could be returned to stable next year. S&P continues to consider the Mount Sinai Medical Center Foundation, which has been transferring $10 million annually to the Medical Center -- as without that support, S&P would likely lower S&P's rating further. S&P will closely monitor the foundation's assets and its ability to transfer funds annually to the hospital in light of investment losses and the current economic environment. MORGAN STANLEY: Fitch Lowers Ratings on $7.523 Mil. Notes to 'B+' ----------------------------------------------------------------- Fitch Ratings has downgraded the notes issued by Morgan Stanley ACES SPC Series 2006-17 and assigned a Negative Outlook,: -- US$7,523,000 notes due December 2011 (ISIN: USG62615EV08) downgraded to 'B+' from 'BB'; Negative Outlook. The transaction is a funded static synthetic corporate CDO referencing a portfolio of corporate obligations with a total reference portfolio notional amount of US$10bn. The rating action follows the bankruptcy filing of Tribune Co. (Issuer Default Rating 'D'/Senior unsecured rating 'C') that represents 1% of portfolio notional. Fitch has assigned a recovery rate of RR6 to all Tribune's senior unsecured obligations, indicating an expected recovery rate of between 0- 10%. The rating action and Negative Outlook reflect the expected erosion of credit enhancement to around 3.5% which is not compatible with a BB range rating given the portfolio profile. The transaction currently has 19.0% of exposure to the Banking & Finance industry, 12.6% of the portfolio on Watch Negative and a substantial 36.4% on Negative Outlook. In addition, 22.7% of the portfolio is currently rated below investment grade, with 0.5% rated in the 'CCC' or below category and 5.6% in the 'B' category. Current credit enhancement levels indicate that the transaction would not be able to withstand the default of all CCC range and B range rated assets, if realised recovery rates continue to be low. At close, proceeds from the issuance of the notes were used to purchase charged assets to collateralize CDS between the issuer and Morgan Stanley Capital Services Inc. (guaranteed by Morgan Stanley, 'A'/'F1'/Stable Outlook). The charged asset has been switched to an investment in shares of the Morgan Stanley US Dollar Liquidity Fund ('AAA'/ 'V1+') from a Lehman Brothers US Dollar Liquidity Fund. Fitch introduced Rating Outlooks for U.S. structured finance in September 2008 to provide investors with forward-looking analysis for a structured finance tranche's credit performance. Fitch's Rating Outlook indicates the likely direction of any rating change over a one- to two-year period and may be Positive, Negative, Stable or, occasionally, Evolving. MORGAN STANLEY: S&P Downgrades Rating on $3 Mil. Notes to 'B-' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the $3.0 million class A-9 secured fixed-rate notes from Morgan Stanley ACES SPC's series 2006-8 to 'B-'from 'B'. The rating action reflects the Dec. 11, 2008, lowering of the corporate credit and other ratings on The Neiman Marcus Group Inc. (B+/Negative/--). Morgan Stanley ACES SPC's series 2006-8 is a credit-linked note transaction. The rating on each class of notes is based on the lowest of (i) the rating on the respective reference obligations for each class (with respect to class A-9, the senior subordinated notes issued by The Neiman Marcus Group Inc.{'B-'}); (ii) the rating on the guarantor of the counterparty to the credit default swap, the interest rate swap, and the contingent forward agreement, Morgan Stanley (A+/Negative/A-1); and (iii) the 'AAA' rating on the underlying securities, the class A certificates issued by BA Master Credit Card Trust II's series 2001-B due 2013. MOTOR COACH: Creditors Committee Opposes Disclosure Statement ------------------------------------------------------------- The official committee of unsecured creditors formed in Motor Coach Industries International Inc.'s says, the disclosure statement to Motor Coach's Chapter 11 plan doesn't tell creditors there "are substantial legal issues in dispute." As required by Section 1125(a)(1) of the Bankruptcy Code, a Chapter 11 disclosure statement must contain information necessary to enable holders of claims and interests in the debtor's estates to make an informed judgment on the plan. According to Bloomberg News' Bill Rochelle, Motor Coach served a terse eight-page objection, saving its big guns for the hearing on confirmation of the proposed Chapter 11 plan. Motor Coach will be able to begin soliciting votes on its Chapter 11 plan and seek confirmation of the plan after it receives approval of the Disclosure Statement. The Creditors Committee, according to Bloomberg News, said it is moving toward a "very expensive discovery process" and a "lengthy trial" over whether it's proper for the plan to pay unsecured creditors nothing. The Debtor won't give ballots to the unsecured creditors as they are deemed to reject the plan. Only creditors secured by a third lien on the Debtors' assets -- classified under Class 4 -- are entitled to vote for the plan. Section 1129(a)(8) of the Bankruptcy Code requires that each class of claims or interests under a plan has either accepted the plan or is not impaired under the plan. The Debtor, however, will seek confirmation of the Plan under Section 1129(b)(1)'s "cramdown" provision. Under the cramdown provision, upon the request of the plan proponent, the plan may be confirmed if it does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan. Terms of the Plan The Troubled Company Reporter reported Nov. 4, 2008, that Motor Coach and its affiliates filed a joint Chapter 11 plan of reorganization, and a disclosure statement on that Plan on Oct. 30, 2008. A hearing will take place on Dec. 17, 2008, at 11:30 a.m., to consider the adequacy of the information in the Debtors' disclosure statement. The hearing will be held at 824 North Market Street, 6th floor, Courtroom 1 in Wilmington, Delaware. Objections, if any, are due Dec. 8, 2008. The plan will deleverage the Debtors' balance sheet by, among other things: -- reduce the Debtors' total prepetition indebtedness by paying in full about $160 million of second lien obligations and discharging an additional $480 million in prepetition indebtedness; -- improve cash flows by reducing ongoing interest expense; and -- provide investment of as much as $160 million in new capital through the rights offering to (i) fund the Debtors' emergence from Chapter 11, (ii) appropriately capitalize the reorganized Debtors, and (iii) facilitate the implementation of the Debtors' business plan. Under the plan, the Debtors will issue shares of new common stock to holders of allowed Class 4 claims and new preferred stock to the rights offering participants. The plan classifies interests against and liens in the Debtors in eight classes. The classification of treatment of interests and claims are: Treatment of Interests and Claims Types Estimated Class of Claims Treatment Recovery ----- --------- --------- --------- 1 other priority unimpaired 100% claims 2 other secured unimpaired 100% claims 3 secured second impaired 100% lien credit agreement claim 4 secured third impaired unknown lien credit agreement claim 5 general unimpaired 0% unsecured claim 6 intercompany unimpaired 100% claim 7 equity interest impaired 0% 8 intercompany unimpaired 100% interest About Motor Coach Wilmington, Delaware-based Motor Coach Industries International, Inc. -- http://www.mcicoach.com/-- and its subsidiaries manufacture intercity coaches for the tour, charter, line-haul, scheduled service, and commuter transit sectors in the U.S. and Canada. They also operate seven sales centers and nine service centers in the U.S. and Canada and is the industry's supplier of aftermarket parts for most makes and models. The Company and its debtor-affiliates filed for separate Chapter bankruptcy protection with the United States Bankruptcy Court for the District of Delaware on September 15, 2008 (Lead Case No. 08-12136), to implement a pre-negotiated restructuring plan to be funded by Franklin Mutual Advisors, LLC and certain of its affiliates. The company's Canadian operations are not included in the filing. Kenneth S. Ziman, Esq., and Elisha D. Graff, Esq., at Simpson Thacher & Bartlett LLP, in New York; and Jason M. Madron, Esq., and Lee E. Kaufman, Esq., at Richards Layton & Finger, P.A., in Wilmington, Delaware, represent the Debtors in their restructuring efforts. Kurtzman Carson Consultants LLC serves as claims and notice agent. Rothschild Inc. and AlixPartners LLP also provide restructuring advice. At the time of filing, the Debtors listed assets of between $500,000,000 and $1,000,000,000 and liabilities of between $100,000,000 and $500,000,000. NATIONAL CONSUMER: Fitch Downgrades Individual Rating to 'B/C' -------------------------------------------------------------- Fitch Ratings has placed the long-term Issuer Default Rating and senior debt rating of National Consumer Cooperative Bank and NCB, FSB on Rating Watch Negative. Fitch has also downgraded NCB's Individual rating to 'B/C' from 'B'. Approximately $1.8 billion in debt is affected by this action. These ratings have been placed on Rating Watch Negative: National Consumer Cooperative Bank -- Long-term IDR 'A-'; -- Senior unsecured debt 'A-'; -- Short-term IDR 'F2'; -- Commercial paper 'F2'. This rating has been downgraded and placed on Rating Watch Negative: National Consumer Cooperative Bank -- Individual to 'B/C' from 'B'. NCB's placement on Rating Watch Negative reflects Fitch's concern that recent operating performance has put pressure on the company's ability to comply with financial covenants under its bank credit agreement. In the event that NCB tripped a covenant, the company would seek to either amend or obtain a waiver of the covenant, which the company has done previously, and Fitch believes would be the most likely outcome. Nonetheless, such accommodations would be costly in Fitch's opinion. Although the company has modest debt maturities, it does have a $50 million bond due in January 2009, and Fitch believes would be paid off with a draw on the bank line, assuming there are no outstanding covenant issues. The bonds are cross-defaulted with the bank line. At Sept. 30, 2008, NCB had available capacity under the bank line of $209.6 million. The resolution of the Rating Watch will be driven by NCB's ability to address potential covenant issues over the near term. However, even if near term liquidity issues are resolved, Fitch has longer term concerns surrounding operating performance as well as limitations in the company's legal entity structure which limit the company's loan capabilities. Although the limitations have been known, the current markets conditions have highlighted them. These mainly emanate from the company's government sponsored entity (GSE) status as well as its ownership of NCB, FSB, a thrift, which require the company to meet certain targets to fulfill its GSE mission as well as the need to meet the qualified thrift lender test (QTL) as a thrift. Taken together, these concerns, if not addressed, could result in a downgrade of the company's IDR by a notch. Fitch's downgrade of NCB's Individual rating to 'B/C' is driven by continued weakness in earnings and profitability due to capital markets dislocations, primarily related to the dormant CMBS market, which was an important earnings driver and funding source. Fitch's Individual rating reflects an entities intrinsic financial profile, absent any external financial support. A 'B/C' rating denotes an adequate institution, however, concerns are building regarding profitability and operating environment. Fitch has downgraded and placed the following on Rating Watch Negative: National Consumer Cooperative Bank -- Individual to 'B/C' from 'B'. NCB, FSB -- Individual to 'B/C from 'B'. Fitch has placed the following on Rating Watch Negative: National Consumer Cooperative Bank -- Long-term IDR 'A-'; -- Senior unsecured debt 'A-'; -- Short-term IDR 'F2'; -- Commercial paper 'F2'. NCB, FSB -- Long-term IDR 'A-'; -- Short-term IDR 'F2'; -- Long-term deposit obligations 'A'; -- Short-term deposit obligations 'F1'. NCB Capital Trust I -- Trust preferred stock 'BBB+'. Fitch also rates the following: National Consumer Cooperative Bank -- Support '5'; -- Support floor 'NF'. NCB, FSB -- Support '1'. NORTEL NETWORKS: To Cure NYSE Average Closing Price Non-Compliance ------------------------------------------------------------------ Nortel Networks Corporation received notice from the New York Stock Exchange that Nortel has fallen below one of NYSE's continued listing standards regarding price criteria for its common stock as a result of the company's common shares having an average closing price of less than $1.00 per share during the consecutive 30 trading days ended Dec. 9, 2008. Under the NYSE's rules, the company has six months from the date of the notice to bring its average common share price back above $1.00. During the interim, Nortel's common stock will remain listed on the NYSE, subject to compliance with other applicable NYSE continued listing requirements. Nortel will notify the NYSE within the required 10-business day period that it intends to cure the deficiency. If the average closing price does not sufficiently improve, Nortel may consider presenting a proposal to its shareholders for a consolidation of its outstanding common shares at its annual meeting planned for spring 2009. About Nortel Networks Headquartered in Ontario, Canada, Nortel Networks Corporation (NYSE/TSX: NT) -- http://www.nortel.com/-- delivers next- generation technologies, for both service provider and enterprise networks, support multimedia and business-critical applications. Nortel's technologies are designed to help eliminate today's barriers to efficiency, speed and performance by simplifying networks and connecting people to the information they need, when they need it. Nortel does business in more than 150 countries around the world. Nortel Networks Limited is the principal direct operating subsidiary of Nortel Networks Corporation. * * * As reported in the Troubled Company Reporter on Dec. 11, 2008, Nortel Networks Corp. has sought legal advice on its possible bankruptcy filing in case its restructuring plan fails, Sara Silver and Joann S. Lublin at The Wall Street Journal report, citing people familiar with the situation. As reported in the Troubled Company Reporter on Nov. 18, 2008, RBC Capital Markets said that Nortel Networks might have to file for Chapter 11 protection by 2011 if it fails to get cash injection. RBC Capital analyst Mark Sue said that Nortel Networks is "overwhelmed with debt and burning cash." NUVEEN INVESTMENTS: Moody's Lowers Corporate Family Rating to 'B2' ------------------------------------------------------------------ Moody's Investors Service has downgraded the corporate family rating of Nuveen Investments, Inc. to B2 from B1. In the same rating action, Moody's also lowered the rating of Nuveen's senior secured bank facility to B1 from Ba3 and lowered the rating of the company's senior unsecured notes to Caa1 from B3. All the ratings have been placed on review for further downgrade. Moody's stated that the rating action was driven by anticipated revenue declines owing to a material reduction in the company's assets under management, which has resulted primarily from severe equity market declines. The rating agency believes that the decrease in Nuveen's earnings will likely lead to a material elevation in the company's already high leverage and possibly a breach of a financial covenant in the company's bank facility in 2009. Moody's noted that Nuveen's downgrade was part of an ongoing examination of asset management firms given its negative outlook on the industry broadly, the severity of recent market declines, and the adverse impact on firms, like Nuveen, that operate with high levels of financial leverage. Moody's Vice President/Senior Credit Officer Matthew Noll stated, "The rating action reflects the material reliance Nuveen now has on a rebound in the market and maintaining cooperative lenders." Moody's expects Nuveen's revenues and operating earnings to decline by over 20% in 2009, despite undertaking cost cutting initiatives. Additional challenges such as refinancing auction rate securities and a generally weaker demand for new closed end funds and retail separately managed accounts create further uncertainties for the company. Moody's views Nuveen's strong excess liquidity position and patient private equity sponsors as mitigating factors. The rating agency said that its review for further downgrade will focus on the company's plan to manage its senior secured leverage covenant of 6x. The review will also examine the company's 2009 plan to operate through a potentially protracted equity market downturn in which the company could be operating with negative net cash flows. These ratings were downgraded and placed on review for further downgrade: -- Nuveen Investments, Inc.: Corporate family rating downgraded to B2 from B1; senior secured revolver downgraded to B1 from Ba3; senior secured term loan downgraded to B1 from Ba3; senior unsecured notes downgrade to Caa1 from B3. Nuveen Investments, Inc., headquartered in Chicago, is a US- domiciled holding company whose subsidiaries provide investment management products and services to retail and institutional investors predominantly in the US. The company's assets under management were $134 billion as of September 30, 2008. The last rating action was on February 29, 2008 when the outlook on Nuveen was changed to negative from stable. PENN TRAFFIC: Incurs Nine Month Loss of $21.4 Million ----------------------------------------------------- The Penn Traffic Company ("Pink Sheets": PTFC), which operates or supplies more than 210 Northeastern U.S. supermarkets, reported revenues of 287.3 million in the three months ended Nov. 1, 2008, compared to $298.7 million in the third quarter of fiscal 2008, reflecting a reduction in corporate-owned grocery stores to 93 from 104 one year ago. Penn Traffic's net loss was $5.6 million, or $0.67 per share, in the third quarter of fiscal 2009, compared to $9.6 million, or $1.13 per share, during the same period last year. Third quarter fiscal 2009 results reflect $1.3 million in non-recurring charges including: (1) professional fees; (2) closed-store costs; (3) SEC legal costs; (4) severance; (5) asset sales and (6) Chapter 11 reorganization costs. Third quarter 2008 results included non- recurring charges of $5.6 million. "We continued to make solid progress in improving Penn Traffic's efficiency and cost structure during the third quarter," President and Chief Executive Officer Gregory J. Young said. "Our commitment to offer our customers good value in a welcoming shopping environment is unwavering. And, while we don't control the economic forces that have pressured revenues and margins across the retail grocery industry, we will continue to modernize and streamline operations to ensure Penn Traffic is well prepared to emerge from this recession stronger and fully prepared to take advantage of incremental improvements in the economy as they occur." The fiscal 2009 industry-wide trend of consumers consolidating shopping trips, trading down in their purchasing decisions and curbing impulse buying continued during the third quarter, resulting in lower sales volumes compared to the third quarter of fiscal 2008. Mitigating the impact of this trend in the third quarter were the continued success of the company's rewards program, launched early in fiscal 2009, investments in marketing and advertising, and value pricing. Penn Traffic's gross margins, like those of many other food retailers, were pressured by high commodity costs that have not been fully passed onto customers in order to maintain value pricing in the competitive marketplace. Gross profit was $72.4 million, or 25.2% of revenues, in the third quarter of fiscal 2009, compared to $79.8 million, or 26.7% of revenues, during the third quarter of fiscal 2008. Even while increasing ad spending in the third quarter of fiscal 2009, Penn Traffic reduced selling and administrative expenses to $76.3 million, or 26.6% of revenues, compared to $83.3 million, or 27.9%, during the same period last year. Lower selling and administrative expenses reflect the company's aggressive continuous-improvement initiatives and corporate-overhead reductions during fiscal 2009, as well as its smaller store portfolio. Third quarter fiscal 2009 operating loss from continuing operations was $3.1 million, compared to $3.3 million during the same period the year prior. EBITDA, including non-recurring charges, was $2.1 million in third quarter of fiscal 2009, compared to $1.0 million in the same period last year. Adjusted for non-recurring charges, EBITDA was $3.4 million, or 1.2 percent of revenues in the quarter ending November 1, 2008, compared to $6.6 million, or 2.2 percent of revenues, during the same period last year. Bloomberg News relates that Penn Traffic was in Chapter 11 twice. Most recently, it confirmed a reorganization plan in March 2005 and gave all the stock to unsecured creditors while cutting the store count almost in half. It completed a previous bankruptcy reorganization in June 1999 before the second filing in May 2003. According to Bloomberg's Bill Rochelle, since the last bankruptcy, the stock's closing high was $24.25 on June 4, 2007. It closed Dec. 11 at 10 cents a share in over-the-counter trading. About Penn Traffic The Penn Traffic Company operates stores in Pennsylvania, New York, Vermont and New Hampshire using the names BiLo, P&C and Quality. The company also has a wholesale food-distribution business. Penn Traffic filed for chapter 11 protection on May 30, 2003 (Bankr. S.D.N.Y. Case No. 03-22945). Kelley Ann Cornish, Esq., at Paul Weiss Rifkind Wharton & Garrison, represented the Debtors in their restructuring efforts. When the grocer filed for protection from their creditors, they listed $736,532,614 in total assets and $736,532,610 in total debts. The Court confirmed the Debtor's First Amended Plan of Reorganization on March 17, 2005. The Plan became effective April 13, 2005, allowing it to formally emerge from Chapter 11. PERRY REALTY: Case Summary & 13 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Perry Realty Plaza, Inc. 3510 Perry Avenue Bronx, NY 10467 Bankruptcy Case No.: 08-15003 Chapter 11 Petition Date: December 13, 2008 Court: Southern District of New York (Manhattan) Debtor's Counsel: Christopher E. Finger, Esq. CEFLaw@aol.com 778 Castle Hill Avenue Bronx, NY 10473 Tel: (718) 824-5800 Fax: (718) 430-9230 Total Assets: $8,000,000 Total Debts: $14,165,085 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ 54, LLC bank loan; $12,710,141 5600A Broadway collateral: Bronx, NY 10463 $8,000,000; unsecured: Zucker & Kwestel LLP $4,710,141 56 Harrison Street New Rochelle, NY 10801 Jay B. Zucker, Esq. Tel: (914) 499-2610 RMJ & Son's Construction Inc. trade debt; $450,000 751 Commonwealth Avenue collateral: Bronx, NY 10473 $8,000,000; unsecured: $450,000 R & R Block & Brick Corp. trade debt; $300,000 751 Commonwealth Avenue collateral: Bronx, NY 10473 $8,000,000; unsecured: $300,000 L & V Construction & Iron trade debt $240,000 Works Inc. Accurate Electric & Control trade debt $125,000 Systems Inc. City of New York, Department $95,000 of Finance Palace Plumbing & Heating trade debt $81,354 Supply Corp. New El Jam Building Materials trade debt $63,000 MSS Construction Corp. trade debt $45,000 C & L Windows & Construction trade debt $40,000 New York City Environmental $7,250 Control Bd. Latin American Container trade debt $6,840 New York City Water Board $1,500 PILGRIM'S PRIDE: Incurs $1.06B Operating Loss for FY2008 -------------------------------------------------------- Pilgrim's Pride Corp., filed with the Securities and Exchange Commission its annual report on form 10-K showing an operating loss of $1.06 billion for the fiscal year ended Sept. 27 on revenue of $8.5 billion. The gross loss was $164 million, and the net loss was $999 million. The company focused its sales efforts on the foodservice industry, principally chain restaurants and food processors. In 2008, it sold 8.4 billion pounds of dressed chicken and generated net sales of $8.5 billion. In 2008, its US operations, including Puerto Rico, accounted for 93.2% of net sales. Mexico operations generated the remaining 6.8% of net sales. Bloomberg News' Bill Rochelle notes that the year's results included a $501 million goodwill impairment charge. In December 2006, the company acquired a majority of the outstanding common stock of Gold Kist Inc., and subsequently acquired the remaining stock. In November 2003, it completed the purchase of all the outstanding stock of ConAgra Foods, Inc.'s chicken division. A copy of the Form 10-K is available for free at: http://researcharchives.com/t/s?3647 Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corporation and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N. D. of Texas, Lead Case No. 08-45664). Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. Pilgrim's Pride had total assets of $3,847,185,000, and debts of $2,700,139,000 as of June 28, 2008. A nine-member committee of unsecured creditors has been appointed in the case. (Pilgrim's Pride Bankruptcy News; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). PILGRIM'S PRIDE: Seeks to Pay Amounts Owed to Employees ------------------------------------------------------- Pilgrim's Pride Corp. and its affiliated debtors seek approval from the U.S. Bankruptcy Court for the Northern District of Texas to pay prepetition amounts owed to their employees. In connection with the Debtors' domestic operations, Pilgrim's Pride employs about 43,000 individuals in the United States. Majority of those employees are compensated on an hourly basis, consisting of: -- 24,236 full-time non-bargaining unit employees, -- 13,165 are full-time bargaining unit employees, -- two temporary NBU interns, -- 62 part-time NBU employees, -- two part-time BU employees, and -- 48 are temporary NBU employees. Pilgrim's Pride also employs individuals on a salaried basis, consisting of (a) 3,765 full-time exempt employees, (b) 1,763 salaried non-exempt full-time employees, (iii) nine SNE part-time employees, and (iv) four SNE temporary employees. Additionally, 43 employees, 12 of whom are employed on an hourly basis, are eligible to receive commissions, in addition to their pay. According to Stephen Young, Esq., proposed counsel to the Debtors, at Weil, Gotshal & Manges LLP, in Dallas Texas, the Debtors' continued operation of their businesses and their successful reorganization depends largely on the retention of the services of their employees and the maintenance of employee morale and cooperation. Consequently, it is critical that the Debtors be authorized to satisfy their employee-related obligations and continue their ordinary course employee plans, policies, and programs in effect as of the Petition Date, he says. As of November 28, 2008, the Debtors estimate that the outstanding prepetition employee obligations aggregate about $74,970,000, including: Wage Obligations $31,750,000 Commission Obligations 17,500 Payroll Taxes and Benefit Deductions 7,700,000 Garnishments 344,000 Medical, Dental and Vision Plans 42,000,000 Basic Life, AD&D, etc. 10,100 Short-term Disability Coverage 245,400 Long-Term Disability Coverage 800 401(k) Plan 150,000 Service Awards 27,000 Tuition Reimbursement Program 370,000 Car Allowance Program 17,150 Relocation Reimbursement Plan 1,100 Severance Plan 246,000 Employee Monthly Stock Investment Plan 66,200 Deferred Compensation Plan 4,200 Legacy Gold Kist Employee Plans 30,800 A summary of the Employee Obligations is available for free at: http://bankrupt.com/misc/EmployeeObligations_112808.pdf The outstanding Employee Obligations with respect to each Employee for the period prior to the Petition Date, do not exceed the $10,950 cap under Section 507(a)(4) of the Bankruptcy Code, the Debtors maintain. The Debtors, accordingly, sought and obtained the Court's authority to pay their current employees for work performed prepetition and to honor certain prepetition employee-related obligations and benefits and to continue administering their employer programs and plans in the ordinary course of the Debtors' business. In line with the request, the Debtors ask the Court to authorize and direct applicable banks to receive, process, honor and pay any and all checks, electronic fund transfers, and automatic payroll transfers drawn on the Debtors' payroll and general disbursement accounts to the extent that the checks or transfers relate to any of the prepetition employee obligations. Mr. Youngman asserts that absent the requested relief, the employees will suffer undue hardship, and in many instances, serious financial difficulties, as the Employees need those amounts to meet their own personal financial obligations. The Court granted the Debtors' request on condition that no insider of the Debtors may be paid pursuant to Incentive Agreements, and provided that approval of the payments under the Incentive Agreements will be without prejudice to the Official Committee of Unsecured Creditors appointed in the Debtors' cases to file a motion for reconsideration of the granting of the request. About Pilgrim's Pride Headquartered in Pittsburgh, Texas, Pilgrim's Pride Corporation (NYSE: PPC) -- http://www.pilgrimspride.com/-- produces, distributes and markets poultry processed products through retailers, foodservice distributors and restaurants in the U.S., Mexico and in Puerto Rico. In addition, the company owns 34 processing plants in the United States and 3 processing plants n Mexico. The processing plants are supported by 42 hatcheries, 31 feed mills and 12 rendering plants in the United States and 7 hatcheries, 4 feed mills and 2 rendering plants in Mexico. Moreover, the company owns 12 prepared food production facilities in the United States. The company employs about 40,000 people and has major operations in Texas, Alabama, Arkansas, Georgia, Kentucky, Louisiana, North Carolina, Pennsylvania, Tennessee, Virginia, West Virginia, Mexico and Puerto Rico, with other facilities in Arizona, Florida, Iowa, Mississippi and Utah. Pilgrim's Pride Corporation and six other affiliates filed Chapter 11 petitions on December 1, 2008 (Bankr. N. D. of Texas, Lead Case No. 08-45664). Pilgrim's Pride has engaged Stephen A. Youngman, Esq., Martin A. Sosland, Esq., and Gary T. Holzer, Esq., at Weil, Gotshal & Manges LLP, as bankruptcy counsel. The Debtors have also tapped Baker & McKenzie LLP as special counsel. Lazard Freres & Co., LLC is the company's investment bankers and William K. Snyder of CRG Partners Group LLC as chief restructuring officer. The company's claims and noticing agent is Kurtzman Carson Consulting LLC. Pilgrim's Pride had total assets of $3,847,185,000, and debts of $2,700,139,000 as of June 28, 2008. (Pilgrim's Pride Bankruptcy News, Issue No. 2; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000). PLCP LP: Files for Chapter 11 After Ethanol Production Halt ----------------------------------------------------------- McClatchy-Tribune reports that Pine Lake Corn Processors has filed for Chapter 11 protection in the U.S. Bankruptcy Court in the Northern District of Iowa, a week after suspending ethanol production. According to McClatchy-Tribune, the 30 million-gallon-per-year ethanol plant near Steamboat Rock stopped production on Dec. 1. Court documents say that Pine Lake listed about $12.7 million in debts to its 20 largest creditors. Richard Updegraff at Des Moines-based Brown Winick law firm, which represents Pine Lake, said that a detailed report on the company's long-term debt will be filed in the Court later this month, McClatchy Tribune states. According to the report, most of the debt is owed to Prairie Land Cooperative of Hubbard, which holds an almost $9.4 million claim against the debtor. Bill Hanigan, the attorney for Pine Lake, said in a statement that he is confident that the plant will resume production as soon as cash flow and supply issues are resolved. Steamboat Rock, Iowa-based PLCP, L.P., Pine Lake's general partner, filed for Chapter 11 protection on Dec. 4, 2008 (Bankr. N. D. Iowa Case No. 08-02680). Bradley R. Kruse, Esq., who has an office at Des Moines, Iowa, represents the company in its restructuring effort. The company listed assets of $10,000,000 to $50,000,000 and debts of $10,000,000 to $50,000,000. PLY GEM: S&P Cuts Corporate Credit Rating to 'B-'; Outlook Neg. --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its corporate credit rating on Cary, North Carolina-based Ply Gem Industries Inc. to 'B-' from 'B'. All ratings were removed from CreditWatch, where they had been placed with negative implications on Nov. 20, 2008. The outlook is negative. "The downgrade and negative outlook reflect Ply Gem's weaker overall financial profile resulting from the ongoing downturn in new residential construction and repair and demand for remodeling," said S&P's credit analyst Thomas Nadramia. "They also reflect our expectation that these markets will remain weak well into 2009. The company's credit metrics have deteriorated to a level no longer consistent with the prior rating." About 45% of Ply Gem's sales are to less-cyclical repair and remodeling activity, which provides some stability. Furthermore, nearly 75% of Ply Gem's cost structure is variable, providing the company with operating flexibility in periods of reduced demand. Still, operating results are vulnerable to intense price competition, changes in raw-material costs -- primarily for PVC resin and aluminum -- and poor weather. Mr. Nadramia said, "We expect end-market demand for Ply Gem's siding and window products to remain weak in 2009 because of reduced new construction activity and declines to low double digits in repair and remodeling spending. S&P could downgrade the ratings if worse-than-expected construction activity reduces operating cash flow to a level below the company's cash interest expense, requiring Ply Gem to use its $150 million asset-based revolving credit facility for debt service. Specifically, if revenues were to decline by 6% and margins contract by an additional 100 basis points, the company would likely generate negative cash flow, necessitating increased debt." POWDER RIVER: Case Summary & 20 Largest Unsecured Creditors ----------------------------------------------------------- Debtor: Powder River Petroluem International, Inc. Suite 2900, Oklahoma Tower 210 Park Avenue Oklahoma City, OK 73102 Bankruptcy Case No.: 08-15613 Chapter 11 Petition Date: December 12, 2008 Court: Western District of Oklahoma (Oklahoma City) Judge: Niles L. Jackson Debtor's Counsel: Mark A. Craige, Esq. mark@law-office.com Morrel, Saffa, Craige, Hicks, et al. 3501 S Yale Ave. Tulsa, OK 74135 Tel: (918) 664-0800 Fax: (918) 663-1383 Total Assets: $1,902,582 Total Debts: $57,412,349 The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ Americo Energy Resources LLC - $5,025,000 McFadden Ranch 7575 San Filipe St., #200 Houston, TX 77063 Oilpods.Com - $2,910,419 8 Temasek Boulevard, #22-02 Suntec Tower Singaapore 38988 Department of the Treasury - $2,627,283 Internal Revenue Service Cincinnati, OH 45999-0039 Magnus Oil & Gas - $1,890,197 Mark Cook - $497,283 Brian Fox - $466,250 Day, Edwards, Popester & - $329,506 Chirstensen, P Goliad Energy - $250,000 Davis & Cannon, LLP - $187,412 Woodrum, Kemendo, Tate & - $151,170 Westemeir Varilease Finance, Inc. - $140,253 BRI Consulting Group, Inc. - $51,017 Chisholm, Bierolf & Nilson - $50,497 Damion Oil, Inc. (Two Bayous) - $50,229 K-3 Services - $44,864 Hein Contracting Inc. - $44,090 Hertz Equipment Rental - $33,494 Corporation Brammer Pipe and Steel, Inc. - $32,453 John J. Vanya, Jr. - $31,383 CK Power Products Corp. - $31,155 The petition was signed by Bruce W. Day, receiver of the company. PRIMEDIA INC: S&P Downgrades Rating on $350 Mil. Facility to 'BB-' ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its issue-level rating on Norcross, Georgia-based PRIMEDIA Inc.'s $350 million secured credit facility to 'BB-' (at the same level as the 'BB-' corporate credit rating on the company) from 'BB'. In addition, S&P revised the recovery rating on this debt to '3', indicating S&P's expectation of meaningful (50%-70%) recovery in the event of a payment default, from '2'. The credit facilities consist of a $250 million term loan B due 2014 and a $100 million revolving credit facility due 2013. S&P's revision of the recovery rating reflects a slightly lower enterprise value under S&P's default analysis than S&P had previously used, as S&P has lowered its emergence EBITDA multiple to 5.5x from 6.0x. This is based on S&P's assumption that providers of exit financing, even in S&P's simulated default year of 2011, could mandate a capital structure with lower debt leverage than we've historically seen. As a result, S&P's default scenario assumes a smaller number of potential buyers, which, in conjunction with declining business fundamentals, results in downward pressure on the resale multiple. The corporate credit rating on PRIMEDIA remains at 'BB-', and the rating outlook is stable. The rating reflects: -- The exposure of the company's rental apartment advertising publications to rental occupancy rates and new construction in the apartment real estate sector, -- Risks from the migration of real estate advertising to the Internet, -- The cyclical nature of its home guides and distribution business, and -- The company's narrower business base following the August 2007 sale of its specialty magazine business. These factors are only partially moderated by: -- The company's established position in the consumer rental and home sale guides publishing segment, -- Its good geographic diversity and population reach through its proprietary distribution network, and -- Its relatively healthy pro forma credit metrics following its third-quarter 2007 refinancing. Ratings List PRIMEDIA Inc. Rating ------ Corporate Credit Rating BB-/Stable/-- Revised Ratings To From -- ---- Senior Secured BB- BB Recovery Rating 3 2 PRIMUS GUARANTY: S&P Junks Long-Term Counterparty Credit Rating --------------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its long- term counterparty credit rating on Primus Guaranty Ltd. to 'CCC' from 'BB'. The outlook is negative. "The downgrade reflects our concern for the potential of diminishing cash flows from Primus Financial Products LLC, the derivatives product company. The DPC's viability as a counterparty to write credit-default swaps business was imperative for the company's subsistence, because Primus relies on revenue streams generated principally by the DPC for its profitability and debt service," said S&P's credit analyst Dan Teclaw. On Dec. 10, 2008, S&P downgraded PFP to 'AA-' from 'AA+' reflecting further weakness in PFP's credit derivative portfolio. S&P is also uncertain as to the outcome of the settlement of Primus' swaps with Lehman Brothers Special Financing Inc. (the counterparty). PFP had $1.4 billion in notional single-name contracts with Lehman. The credit derivative market has dramatically pulled back and this is reflected in the shrinking notional amounts outstanding reported by the British Bankers Association. In this environment, it will be even more challenging for PFP to write more credit derivative protection because it does not post collateral. Thus PFP represents a static portfolio whose revenue stream will decline as it considers hedging or other risk-mitigation transactions in this challenging credit environment. The DPC is currently amortizing and has not written any new business since third-quarter 2008, as it does not post collateral and, therefore, has not been considered a viable counterparty in this market. Primus, then, represents a static portfolio that can only lose dividend capacity as it considers hedging or other risk- mitigation transactions in this challenging credit environment. As S&P expected in these economic conditions, corporate defaults are increasing and having a direct bearing on the company's economic results. Until recently, S&P were of the opinion that much of the deterioration in GAAP earnings was attributable to market sentiment in spread widening as opposed to actual credit deterioration. S&P now believes escalating corporate defaults will affect the company's economic results and have a more immediate impact on profitability, liquidity, and capital at PFP, and ultimately reduce cash flows to Primus. The outlook is negative. S&P will monitor credit events to see how they affect the company's liquidity and capital. There is no upward potential for the counterparty rating because no new additions to cash flow streams are occurring. If corporate defaults continue to manifest themselves in even higher credit events for the DPC, S&P could lower its rating on PGL farther. PROGENICS PHARMACEUTICALS: To Cure Nasdaq Listing Non-Compliance ---------------------------------------------------------------- Progenics Pharmaceuticals, Inc., received a Nasdaq Staff Deficiency Letter indicating that it fails to comply with Nasdaq's audit committee requirements. As a result of Paul F. Jacobson's resignation from the company's board of directors, the company's audit committee has only two members, both of whom are independent directors. Nasdaq Marketplace Rule 4350 requires a Nasdaq listed company to have an audit committee with at least three members, all of whom must be independent. The company intends to regain compliance with this requirement within the cure period provided by Nasdaq rules, and has begun the process of seeking a qualified candidate to serve on its audit committee. During this period, the company's common stock will continue to trade on Nasdaq subject to continued compliance with other listing requirements. Nasdaq Marketplace Rule 4350(d)(4) provides a cure period for restoring compliance with the audit committee requirements. In the company's case, the period extends until the company's next annual shareholders' meeting, which is expected to be held in June 2009. If the company were not to name a new independent Audit Committee member in this timeframe, Nasdaq could begin proceedings to delist its shares. About Progenics Pharmaceuticals, Inc. Headquartered in Tarrytown, New York, Progenics Pharmaceuticals, Inc. (NASDAQ:PGNX) -- http://www.progenics.com/-- is a biopharmaceutical company focusing on the development and commercialization of innovative therapeutic products to treat the unmet medical needs of patients with debilitating conditions and life-threatening diseases. Principal programs are directed toward gastroenterology, virology -- including human immunodeficiency virus (HIV) and hepatitis C virus (HCV) infections -- and oncology. PULTE HOMES: Fitch Downgrades Issuer Default Rating to 'BB+' ------------------------------------------------------------ Fitch Ratings has downgraded Pulte Homes, Inc.'s Issuer Default Rating and outstanding debt ratings: -- IDR to 'BB+' from 'BBB-'; -- Senior unsecured to 'BB+' from 'BBB-'; -- Unsecured bank credit facility to 'BB+' from 'BBB-'. The Rating Outlook remains Negative. The downgrade reflects the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect negative trends in PHM's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. However, PHM's liquidity position provides a buffer and supports the new ratings. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. PHM's rating is based on the company's broad geographic and product diversity and a long track record of adhering to a disciplined financial strategy. PHM's Del Webb (active adult) segment is perhaps the best-recognized brand name in the homebuilding business and continues to outperform the company's traditional housing segment. PHM controls roughly a 5.3-year supply of land based on latest 12 months home deliveries, 85.8% of which are owned and the balance controlled through options. (The options share of total lots controlled is down sharply over the past two years as the company has written off substantial numbers of options.) PHM's liquidity remains healthy and provides flexibility. PHM ended the third quarter of 2008 with $1.17 billion of cash on the balance sheet and no borrowings under its $1.6 billion revolving credit facility. Subsequently, PHM amended its credit facility to, among other things, reduce the aggregate commitment from $1.6 billion to $1.2 billion, modify tangible net worth and leverage covenants and establish a liquidity reserve requirement if the company's interest coverage falls below 2.0 times. PHM generated $280 million of cash flow from operations during the third quarter of fiscal year 2008 and has generated $1.66 billion of cash flow during the last twelve months. PHM has an established track record of financial discipline as leverage remained below 45% (on an annual basis) for the past sixteen years. However, the erosion of shareholder's equity from non-cash real estate charges has led to untypically high leverage. As of Sept. 30, 2008, PHM's leverage as measured by debt to capitalization was 51% and its net debt to capitalization was 41%. PHM's long term targeted leverage range is 35-45%. Management is in position to adapt to changes in economic conditions without exposing creditors to increased risks, given PHM's operational profile and financial flexibility. QUANTUM CORPORATION: Moody's Reviews 'B3' Ratings for Likely Cuts ----------------------------------------------------------------- Moody's Investors Service has placed Quantum Corporation's ratings on review for possible downgrade. The review was prompted by concerns about the company's ability to retain sufficient liquidity in light of the potential accelerated maturity of the remaining $250 million senior secured term loan in February 2010. While the term loan matures on July 12, 2014, it is subject to accelerated maturity if the company does not repay, refinance, or convert into equity (deemed unlikely given the conversion price of $4.35 per share) $135 million of its existing $160 million of convertible subordinated notes prior to February 1, 2010. The review will focus on the company's prospective ability to satisfy this potentially accelerated debt maturity and prospects for improving its cash position by increasing free cash flow in the midst of the current economic downturn and/or potentially selling certain assets, business lines, or the company as a whole, if necessary. The review will also assess the company's ability to access capital markets, implement additional restructuring programs, manage working capital needs, and maintain compliance with its financial maintenance covenants, which step down on March 30, 2009. Ratings on review for possible downgrade (note that LGD Assessments and point estimates are subject to change pending conclusion of the rating review) are: -- Corporate Family Rating, B3; -- Probability-of-default rating, B3; -- $50 million senior secured revolver expiring 2012, B1 (LGD 3, 32%); -- $400 million senior secured first lien facility due 2014 (remaining balance of $250 million), B1 (LGD 3, 32%); -- $160 million subordinated convertible notes due 2010, Caa2 (LGD 6, 91%) The last rating action for Quantum Corporation was on June 18, 2007, when Moody's affirmed the company's B3 Corporate Family Rating and assigned a B1 rating to its $50 million senior secured revolver (expiring 2012) and $400 million term loan (due 2014). With $919 million in revenues for the twelve months ended September 30, 2008, Quantum Corporation, headquartered in San Jose, California, is a leading global data storage company offering a broad portfolio of disk-based deduplication/replication, tape and software products for backup, recovery and archive. QUESTEX MEDIA: Shortfall in Revenue Cues Moody's Junk Ratings ------------------------------------------------------------- Moody's Investors Service downgraded Questex Media Group, Inc.'s Corporate Family Rating and Probability of Default Rating to Caa1 from B3 and lowered the rating on the first lien senior secured credit facility to B2 from B1. Concurrently, the outlook was changed to negative from stable. The downgrade to Caa1 and change in outlook were prompted by a shortfall in third quarter revenue and operating results compared to Moody's previous expectations, stemming mostly from Questex's advertising-based publications business. Meanwhile, a debt- financed acquisition in January 2008 along with earn-out payments made in the second and third quarters has led to a significant increase in outstanding debt levels and a deterioration in liquidity. The negative outlook further reflects macroeconomic and industry-wide trends that continue to affect end market demand for advertising spend and Moody's concern that current conditions could lead to further declines in Questex's operating results. The Caa1 rating reflects Questex's very high financial leverage of approximately nine times, a relatively small revenue base, and a weak liquidity profile. Management has begun implementing sizable cost-containment measures to offset revenue declines expected in the near term. Nonetheless, Moody's expects 2009 cash flow to be negative after consideration of estimated earn-out payments due to former owners. With only $6 million of availability on the revolver at September 30, 2008, any additional deterioration in liquidity could lead to a downgrade. The ratings are supported by the diversification of the company's products and customers, low maintenance capital spending requirements, and the contribution of the trade show / expositions segment that, so far, has experienced a less pronounced decline in results. The company's trade shows generate higher margins than its print publications segment and bookings are typically contracted well in advance of the event, which provides some visibility into future revenues. Therefore a material decline in trade show revenues, most of which are generated in the first five months of the year, would likely lead to further downgrade. Moody's downgraded these ratings: -- $30 million first lien revolving credit facility due 2012, to B2 / LGD3(30%) from B1 / LGD3(32%) -- $148 million first lien term loan due 2014, to B2 / LGD3(30%) from B1 / LGD3(32%) -- Corporate Family Rating, to Caa1 from B3 -- Probability of Default Rating, to Caa1 from B3 These rating was affirmed: -- $55 million second lien term loan due 2014, Caa2 / LGD5(78%) from Caa2 / LGD5(82%) Moody's does not rate $37 million of payment-in-kind senior notes issued by Questex's parent, QMG Holdings, Inc. Questex's ratings were assigned by evaluating factors Moody's believe are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside Questex's core industry and Questex's ratings are believed to be comparable to those of other issuers of similar credit risk. The previous rating action occurred on August 13, 2007 when Moody's assigned a first-time CFR of B3. Questex Media Group, Inc. is a diversified business-to-business integrated media and information provider headquartered in Newton, Massachusetts. Questex serves multiple industries including technology, telecommunications, beauty, spa, travel, hospitality, leisure, abilities, home entertainment, landscape design, building services and natural resources. The company's properties include over 100 print and digital media publications, 45 conferences/trade shows/events, and a range of research, data and information products. For the twelve months ended September 30, 2008, pro forma revenues were approximately $145 million. QSOUND LABS: Has Until Dec. 23 to Submit Nasdaq Compliance Plan --------------------------------------------------------------- QSound Labs, Inc., received from The Nasdaq Stock Market a letter indicating that the company is not in compliance with the stockholders' equity, market value of publicly held shares and total asset and revenue requirements for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Marketplace Rules 4310 (c)(3)(A), 4310 (c)(3)(B) and 4310 (c)(3)Copyright. The company has been requested, and intends to, submit a specific plan to achieve and sustain compliance with The Nasdaq Capital Market listing requirements on or before Dec. 23, 2008, including the time frame for completion of the plan. If the staff of The Nasdaq Stock Market determines that the company's plan does not adequately address the failure to comply with the listing requirements, the Staff will provide written notification that the company's securities will be delisted. At that time, the company may appeal the Staff's decision to a Nasdaq Listings Qualifications Panel. Headquartered in Alberta, Canada, QSound Labs, Inc. (NASDAQ:QSND) --http://www.qsound.com/-- is an audio technology company. Since its inception in 1988, the company has developed proprietary audio solutions that include virtual surround sound, positional audio and stereo enhancement for the mobile devices, consumer electronics, PC/multimedia, and Internet markets. RACE POINT: Fitch Downgrades Ratings on Seven Classes of Notes -------------------------------------------------------------- Fitch Ratings affirms two and downgrades seven classes of notes issued by Race Point II CLO, Ltd./Inc. (Race Point II). Additionally, Fitch assigns outlooks to all nine classes. These rating actions are effective immediately: -- $402,000,000 class A-1 affirmed at 'AAA'; Outlook Stable; -- $15,000,000 class A-2 affirmed at 'AA+'; Outlook Stable; -- $15,000,000 class B-1 downgraded to 'BBB+' from 'A'; Outlook Stable; -- $38,000,000 class B-2 downgraded to 'BBB+' from 'A'; Outlook Stable; -- $12,000,000 class C-1 downgraded to 'BB' from 'BBB'; Outlook Stable; -- $5,000,000 class C-2 downgraded to 'BB' from 'BBB'; Outlook Stable; -- $3,500,000 class D-1 downgraded to 'B' from 'BB+'; Outlook Stable; -- $3,000,000 class D-2 downgraded to 'B' from 'BB+'; Outlook Stable; -- $4,000,000 class D-3 downgraded to 'B' from 'BB+'; Outlook Stable. The rating actions reflect Fitch's view on the credit risk of the rated notes following the release of its new Corporate CDO rating Criteria. Race Point II is a cash flow collateralized loan obligation that closed in April 2003 and is managed by Sankaty Advisors, LLC. Race Point II is currently in its reinvestment period which will end in May 2009. The portfolio is comprised of 90.4% senior secured loans, 2.7% second lien loans and 7.0% senior unsecured or subordinated debt. The four largest Fitch industry concentrations in Race Point II are gaming, leisure & entertainment (9.8%), broadcasting & media (8.9%), chemicals (7.6%) and automobiles (7.5%). The five largest obligors represent approximately 11% of the portfolio and the single largest obligor accounts for approximately 2.5% of the portfolio. The class A-1 and A-2 notes are affirmed due to their senior position in the capital structure. The credit enhancement provided by the subordinated tranches and the structural protection of the class A overcollateralization test sufficiently protect the notes from peak default stresses on the portfolio. The downgrades to the class B-1 and B-2 notes (collectively, class B), class C-1 and C-2 notes (collectively, class C) and class D-1, D-2 and D-3 notes (collectively, class D) incorporate the negative credit migration in the portfolio. According to the latest trustee report, the average credit quality of the portfolio is 'B- ' versus a covenant of 'B+/B'. Approximately 11.4% and 30.7% of the portfolio is on Rating Watch Negative or has a Negative Outlook, respectively, by at least one rating agency, which was factored into the analysis by making standard adjustments as described in Fitch's updated corporate CDO criteria. Overall, 26.1% of the portfolio is considered rated 'CCC+' or lower. Defaulted securities account for 1.8% of the portfolio. While the portfolio has experienced limited defaults to date, the downgrade reflects the credit support available to the class B, C and D notes relative to the composition of the portfolio, including the amount of relatively low rated assets and the level of exposure to weakened sectors, as well as Fitch's collateral performance expectations. The current rating levels reflect the actual portfolio credit deterioration, as well as anticipated rating migration indicated by large portions of the portfolio with a Negative Outlook or Watch status. Accordingly, Fitch's Outlook for the notes is Stable for the next one to two years. The ratings of the class A-1 and class A-2 notes address the likelihood that investors will receive full and timely payments of interest per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class B, C, and D notes address the likelihood that investors will receive ultimate and compensating interest payments per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. Fitch released updated criteria on April 30, 2008 for Corporate CDOs and, at that time, noted it would be reviewing its ratings accordingly to establish consistency for existing and new transactions. As part of this review, Fitch makes standard adjustments for any names on Rating Watch Negative or Outlook Negative, reducing such ratings for default analysis purpose by two and one notch, respectively.. Fitch introduced Rating Outlooks for U.S. structured finance in September 2008 to provide investors with forward-looking analysis for a structured finance tranche's credit performance. Fitch's Rating Outlook indicates the likely direction of any rating change over a one- to two-year period and may be Positive, Negative, Stable or, occasionally, Evolving. RACE POINT: Fitch Affirms Ratings on Eight Classes of Notes ----------------------------------------------------------- Fitch Ratings affirms and assigns outlooks to eight classes of notes issued by Race Point CLO, Ltd./Inc. These rating actions are effective immediately: -- $123,826,475 class A-1 affirmed at 'AAA'; Outlook Stable; -- $71,000,000 class A-2 affirmed at 'AA-'; Outlook Stable; -- $10,000,000 class B-1 affirmed at 'A-'; Outlook Stable; -- $12,000,000 class B-2 affirmed at 'A-'; Outlook Stable; -- $20,000,000 class C affirmed at 'BBB'; Outlook Stable; -- $15,500,000 class D-1 affirmed at 'BB-'; Outlook Stable; -- $2,000,000 class D-2 affirmed at 'BB-'; Outlook Stable; -- $3,500,000 class D-3 affirmed at 'BB-'; Outlook Stable. The rating actions reflect Fitch's view on the credit risk of the rated notes following the release of its new Corporate CDO rating Criteria. Race Point is a cash flow collateralized loan obligation that closed in November 2001 and is managed by Sankaty Advisors, LLC. The reinvestment period ended in May 2007 and the notes are currently amortizing. The portfolio is comprised of 88.7% senior secured loans, 3.2% second lien loans and 8.1% senior unsecured or subordinated debt. The four largest industry concentrations in Race Point are gaming, leisure & entertainment (11.2%), automobiles (10.6%), chemicals (9.1%) and broadcasting & media (8.4%). The five largest obligors represent approximately 11% of the portfolio and the single largest obligor accounts for approximately 2.5% of the portfolio. The current average credit quality of the portfolio is 'B-'. Approximately 10% and 30.9% of the portfolio is on Rating Watch Negative or has a Negative Outlook, respectively, by at least one rating agency, which was factored into the analysis by making standard adjustments as described in Fitch's updated Corporate CDO criteria. Overall, approximately 27.7% of the portfolio is considered rated 'CCC+' or lower. That said, all the overcollateralization ratios are significantly above their current triggers as well as their levels at closing. Furthermore, the portfolio has experienced limited defaults since inception with defaulted securities currently representing 1.5% of the portfolio. The affirmations are the result of increased credit enhancement for all the rated classes of notes despite the moderate credit deterioration in the portfolio. The increase in credit enhancement available to the rated notes reflects the deleveraging of the class A-1 notes. Following the most recent payment in November 2008, the class A-1 had received a cumulative $203.2 million, representing 62.1% of the initial notional. The Stable Outlook assigned to the notes reflects the ability of the increased credit enhancement to mitigate some of the risk associated with the relatively low rated assets and the exposure to weakened sectors in the portfolio. The ratings of the class A-1 and A-2 notes address the likelihood that investors will receive full and timely payments of interest per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class B-1, B-2, C, D-1, D-2 and D-3 notes address the likelihood that investors will receive ultimate and compensating interest payments per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. Fitch released updated criteria on April 30, 2008 for Corporate CDOs and, at that time, Fitch noted it would be reviewing its ratings accordingly to establish consistency for existing and new transactions. As part of this review, Fitch makes standard adjustments for any names on Rating Watch Negative or Outlook Negative, reducing such ratings for default analysis purpose by two and one notch, respectively Fitch introduced Rating Outlooks for U.S. structured finance in September 2008 to provide investors with forward-looking analysis for a structured finance tranche's credit performance. Fitch's Rating Outlook indicates the likely direction of any rating change over a one- to two-year period and may be Positive, Negative, Stable or, occasionally, Evolving. RELIANT ENERGY: Breakup Fee Appeal Survives Sale of Property ------------------------------------------------------------ While Reliant Energy Inc. has obtained confirmation of its Chapter 11 plan, a $15 million appeal remains outstanding. According to Bloomberg News' Bill Rochelle, Kelson Energy Inc., the independent power producer that lost the auction for Reliant's 830-megawatt Channelview power plant near Houston, defeated the company's motion asking the U.S. District Court in Delaware to dismiss Kelson's appeal of a decision of the Bankruptcy Court denying Kelson a $15 million breakup fee. The issue on appeal, Mr. Rochelle relates, was whether Kelson filed its appeal too late. Reliant argued Kelson should have appealed when the Bankruptcy Court approved bidding procedures and denied Kelson a breakup fee. Kelson took the position an appeal was not required until the bankruptcy judge later approved the sale. U.S. District Judge Joseph Farnan in Wilmington, Delaware handed down his opinion on Dec. 9, agreeing with other courts that an appeal on a denied breakup fee need not be taken until the Bankruptcy Court approves the sale. Judge Farnan noted there would have been no need for appeal had Kelson won the auction. Farnan also said he couldn't conclude that paying a $15 million breakup fee would have had a "significant impact" on the estate when the sale in July for $500 million was paying creditors in full. Having denied the motion to dismiss the appeal, Judge Farnan will next decide the case on the merits and determine if Kelson is entitled to the $15 million, Bloomberg states. The appeal is Kelson Channel View LLC v. Reliant Energy Channel View LP (In re Reliant Energy Channelview LP), 08-409, U.S. District Court, District of Delaware (Wilmington). As reported by yesterday's Troubled Company Reporter, also citing Bloomberg News, Reliant Energy's joint plan of liquidation became effective and it emerged from Chapter 11 protection. The Plan is built upon the sale of the Debtor's business to GIM Channelview Cogeneration, LLC. The Debtors and GIM entered into an GIM asset purchase agreement, wherein GIM did not provide for the assumption and assignment of the Second Amended Restated Cash Flow Participation Agreement (CFPA) between the Debtors and Equistar Chemicals LP. The purchase price under the GIM APA was $500 million. The proceeds of the proposed GIM APA were sufficient to pay all creditor claims in full and provide a recovery to interest holders. About Reliant Energy Channelview Based in Houston, Reliant Energy Channelview L.P. owns a power plant located near Houston, and is an indirect wholly owned subsidiary of Reliant Energy Inc. -- http://www.reliant.com/-- The company and its three affiliates, Reliant Energy Channelview (Texas) LLC, Reliant Energy Channelview (Delaware) LLC, and Reliant Energy Services Channelview LLC filed for chapter 11 protection on Aug. 20, 2007 (Bankr. D. Del. Lead Case No. 07-11160). Jason M. Madron, Esq., Lee E. Kaufman, Esq., Mark D. Collins, Esq., Paul Noble Heath, Esq., Richards, Robert J. Stearn Jr., Esq., at Layton & Finger P.A., and Timothy P. Cairns, Pachulski Stang Ziehl & Jones represent the Debtors. The U.S. Trustee for Region 3 appointed an Official Committee of Unsecured Creditors in these cases. David B. Stratton, Esq., and Evelyn J. Meltzer, Esq., at Pepper Hamiltion LLP, represent the Committee. When the Debtors filed for protection from their creditors, they listed total assets of $362,000,000 and total debts of $342,000,000. RESIDENTIAL CAPITAL: Fitch Takes Servicer Rating Actions -------------------------------------------------------- Fitch Ratings has taken these rating actions on Residential Capital LLC's U.S. residential mortgage servicer ratings: -- Primary servicer for prime product downgraded to 'RPS4' from 'RPS3'; -- Primary servicer for Alt-A product downgraded to 'RPS4' from 'RPS3'; -- Primary servicer for subprime product downgraded to 'RPS4' from 'RPS3-'; -- Primary servicer for HLTV product downgraded to 'RPS4' from 'RPS3-'; -- Primary servicer for HE/HELOC product downgraded to 'RPS4' from 'RPS3-'; -- Primary specialty-subservicer downgraded to 'RPS4' from 'RPS3'; -- Special servicer downgraded to 'RSS4' from 'RSS3-'; -- Master servicer downgraded to 'RMS4' from 'RMS3-'. Fitch also removes the servicer ratings from Rating Watch Negative. Fitch recently completed its operational review of ResCap's servicing operations and confirmed that the company continues to perform at a level consistent with the prior year. The servicer rating downgrades are due to ResCap's deteriorating financial condition. Fitch downgraded ResCap's Issuer Default Rating to 'D' from 'C' and removed the Rating Watch Negative on June 5, 2008 following completion of the company's distressed debt exchange. The servicer rating actions reflect the continued pressure on ResCap's liquidity position and financial flexibility and the potential impact on the company's servicing operations. A company's financial condition is an important component of Fitch's servicer rating analysis. As of June 30, 2008, ResCap serviced 3.1 million loans for $437 billion. The servicing portfolio was comprised of 14.3% non- agency prime first and second liens, 9.7% subprime first and second liens, 8.1% Alt-A, 2.4% HLTV, and 9.5% HELOC products, with the balance consisting of conventional conforming, FHA, VA, and manufactured housing loans. ResCap's master servicing portfolio was comprised of over 592,000 loans for $119.3 billion. Fitch will continue to monitor ResCap's financial condition and its impact on the company's servicing and operational capabilities and performance. Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus and minus as well as the flat rating. RESIDENTIAL CAPITAL: GMAC Extends Offerings Until December 26 ------------------------------------------------------------- GMAC Financial Services amended and extended its separate private exchange offers and cash tender offers to purchase and exchange certain of its and its subsidiaries' and Residential Capital, LLC's outstanding notes in order to reflect an agreement in principle reached with representatives of a substantial portion of the outstanding notes. This is GMAC Financial's fourth extension of the early delivery time to provide investors the opportunity to consider the GMAC and ResCap offers. GMAC said that the amount of notes covered by the agreement in principle on the material terms of the offer represents substantial progress toward attaining the estimated overall participation that would be required to satisfy the condition for a minimum amount of regulatory capital in connection with GMAC's application to become a bank holding company. However, significant additional participation will also be required. In order for the condition to be satisfied, the estimated overall participation in the offers would be required to be approximately 75% on a pro rata basis. The Federal Reserve has informed GMAC that if GMAC is unable to meet these capital requirements, it will not approve GMAC's application to become a bank holding company. GMAC disclosed tha it has extended the early delivery time with respect to the offers to 5:00 p.m., New York City time, on Dec. 16, 2008, and extended the expiration date of the offers to 11:59 p.m., New York City time, on Dec. 26, 2008. The withdrawal deadline with respect to the offers has not been extended. The amendments include an increase in the annual dividend rate to 9% (to be reduced to 7% after GMAC shall have raised at least $2 billion of new Tier 1 capital, $750 million of which is to be contributed by GMAC's existing shareholders) and the addition of certain covenants relating to the new guaranteed notes, including restrictions on liens, subsidiary guarantees and asset sales. To date, approximately $6.8 billion in aggregate principal amount or 24% of the outstanding GMAC old notes have been tendered in the GMAC offers and approximately $2.4 billion in aggregate principal amount or 25% of the outstanding ResCap old notes have been tendered in the ResCap offers. These results do not include the notes covered by the agreement in principle. GMAC intends to distribute supplements to the confidential offering memoranda distributed with respect to the GMAC and ResCap offers, containing the complete final amendments to the terms and conditions of the GMAC and ResCap offers. Global Bondholder Services Corporation, the information agent for the offers, is available to assist investors with questions regarding the tender and exchange process or other logistical issues, at (866) 794-2200 (U.S. Toll-free). Documents relating to the offers will only be distributed to holders of the old notes who complete and return a letter of eligibility confirming that they are within the category of eligible investors for this private offer. Noteholders who desire to obtain a copy of the eligibility letter should also contact Global Bondholder Services Corporation. About GMAC LLC GMAC LLC -- http://www.gmacfs.com/-- formerly General Motors Acceptance Corporation, is a global, diversified financial services company that operates in approximately 40 countries in automotive finance, real estate finance, insurance and other commercial businesses. GMAC was established in 1919 and employs approximately 26,700 people worldwide. GMAC Financial Services is in turn wholly owned by GMAC LLC. Cerberus Capital Management LP led a group of investors that bought a 51% stake in GMAC LLC from General Motors Corp. in December 2006 for $14 billion. For three months ended Sept. 30, 2008, the company reported net loss of $2.5 billion compared to net loss of $1.5 billion for the same period in the previous year. For nine months ended Sept. 30, 2008, the company incurred net loss of $5.5 billion compared to $1.6 billion for the same period in the previous year. At Sept. 30, 2008, the company's balance sheet showed total assets of $211.3 billion, total liabilities of $202.0 billion and members' equity of about $9.3 billion. About ResCap Headquartered in Minneapolis, Minnesota, Residential Capital LLC -- http://www.rescapholdings.com/-- is the home mortgage unit of GMAC Financial Services, which is in turn wholly owned by GMAC LLC. * * * As reported in the Troubled Company Reporter on Dec 3, 2008, Dominion Bond Rating Service placed all ratings of Residential Capital, LLC, including its Issuer and Long-Term Debt rating of C, Under Review with Negative Implications. RESIX FINANCE: Moody's Downgrades Ratings on 71 Tranches -------------------------------------------------------- Moody's Investors Service has downgraded the ratings of seventy one tranches in the RESI / RESIX shelf, and the EASI Finance Limited Partnership 2007-1 transactions. The certificates and notes are protected through subordination, including a non- amortizing unrated tranche. The synthetic transaction provides the owner of a sizable pool of jumbo mortgages credit protection similar to the credit enhancement provided through subordination in conventional residential mortgage backed securities transactions. The reference portfolio includes prime conforming and nonconforming balance fixed-rate and adjustable-rate mortgages purchased from various originators. The portfolio is generally static as in most RMBS deals. Through an agreement with the securities issuer, the Protected Party pays a fee for the transfer of a portion of the portfolio risk. Investors in the securities have an interest in the holdings of the issuer, which include highly rated investment instruments, a forward delivery agreement and fee collections on the agreement with the Protected Party. Investors are exposed to risk from the reference portfolio but benefit only indirectly from cash flows from these assets. The actions are triggered by higher than anticipated rates of delinquency, foreclosure, and REO in the underlying collateral relative to currently available credit enhancement levels. The actions listed below reflect Moody's revised expected losses on the Jumbo sector announced in a press release on September 18th, and are part of Moody's on-going review process. The ratings on the notes were monitored by evaluating factors determined to be applicable to the credit profile of the notes, such as i) the nature, sufficiency, and quality of historical performance information regarding the asset class ii) an analysis of the collateral being securitized, iii) an analysis of the transaction's allocation of collateral cashflow and capital structure, and (iv) a comparison of these attributes against those of other similar transactions. Moody's calculates estimated losses for Jumbo RMBS in a two-stage process. First, serious delinquencies are projected through late 2009, primarily based upon recent historical performance. These projected delinquencies are converted into projected losses using lifetime roll rates (the probability of transition to default) averaging 40% for 60-day delinquencies, 75% for delinquencies greater than 90 days, and 90-100% for foreclosure or REO, and severity assumptions averaging 35%. The second step is to determine losses for the remaining life of the deal, following the projection period. Depending on a deal's performance, including delinquency, default, and prepayment rates, as well as collateral characteristics, such as loan type (fixed or adjustable), or loan-to-value ratios and geographic concentrations of remaining current loans, Moody's assumes varying degrees of slowing in the loss rate (which is measured by loss-to- liquidation) for the remaining life of the deal. Typical degrees of slowing in loss rate after late 2009 range from no slowing at all to 40% slowing. To take an example, a deal with very poor early performance due to relatively high loan-to-value ratios and dropping regional home values would be expected to see markedly high delinquency and loss rates for the next year. But the high rate of losses may be expected to slow afterwards, as economic factors and real estate values begin to stabilize, and a slowing of 20-40% may be used in the projection. On the other hand, a deal with stronger early performance that is demonstrating relative resiliency in the current market environment may not be expected to have high losses in the near-term, but may be expected to sustain a similar level of losses for the life of the deal, as the pool continues to be subject to factors that have more historically driven prime performance such as borrower life events, unemployment, and so on. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly if necessary. The credit-linked notes in the RESIX shelf replicate the cash flow of synthetic RMBS securities issued: -- RESIX Finance Limited Credit Linked Notes, Series 2004-A replicates the cash flows of Class B7, Class B8, Class B9 and Class B10 issued by the Real Estate Synthetic Investment Securities, Series 2004-A transaction. -- RESIX Finance Limited Credit Linked Notes, Series 2005-A replicates the cash flows of Class B7 and Class B8 issued by the Real Estate Synthetic Investment Securities, Series 2005- A transaction. -- RESIX Finance Limited Credit-Linked Notes, Series 2005-D replicates the cash flows of Class B7, Class B8, Class B9 and Class B10 issued by the Real Estate Synthetic Investment Securities, Series 2005-D transaction. -- RESIX Finance Limited Credit-Linked Notes, Series 2006-A replicates the cash flow of Class B7 issued by the Real Estate Synthetic Investment Securities, Series 2006-A transaction -- RESIX Finance Limited Credit- Linked Notes, Series 2006-C replicates the cash flows of Class B7, Class B8 and Class B9 issued by the RESI Finance Limited Partnership 2006-C transaction. Complete rating actions are: Issuer: RESI Finance Limited Partnership 2004-A RESI Finance Limited Partnership 2004-A/RESI Finance DE Corporation 2004-A -- Cl. B10 Notes, Downgraded to B2, previously on 11/14/2007 Upgraded to Ba3 Issuer: RESIX Finance Limited Credit-Linked Notes, Series 2004-A -- Cl. B10 Notes, Downgraded to B2, previously on 11/20/2008 Upgraded to Ba3 Issuer: RESI Finance Limited Partnership 2005-A -- Cl. B8 Certificate, Downgraded to B1, previously on 11/20/2008 Ba3 Placed under Review for Possible Downgrade Issuer: RESIX Finance Limited Credit-Linked Notes, Series 2005-A -- Cl. B8 Notes, Downgraded to B1, previously on 11/20/2008 Ba3 Placed under Review for Possible Downgrade Issuer: Real Estate Synthetic Investment Securities, Series 2005-B -- Cl. B5 Certificate, Downgraded to Baa3, previously on 6/29/2005 Assigned to Baa2 -- Cl. B6 Certificate, Downgraded to Ba2, previously on 6/29/2005 Assigned to Baa3 Issuer: RESI Finance Limited Partnership 2005-C -- Cl. B1 Certificate, Downgraded to Aa3, previously on 4/11/2006 Assigned to Aa2 -- Cl. B2 Certificate, Downgraded to A1, previously on 11/20/2008 Aa3 Placed under Review for Possible Downgrade -- Cl. B3 Certificate, Downgraded to Baa2, previously on 11/20/2008 A2 Placed under Review for Possible Downgrade -- Cl. B4 Certificate, Downgraded to Ba1, previously on 11/20/2008 A3 Placed under Review for Possible Downgrade -- Cl. B5 Certificate, Downgraded to B3, previously on 11/20/2008 Baa2 Placed under Review for Possible Downgrade -- Cl. B6 Certificate, Downgraded to C, previously on 11/20/2008 Baa3 Placed under Review for Possible Downgrade Issuer: RESI Finance Limited Partnership 2005-D, Real Estate Synthetic Investment Securities, Series 2005-D -- Cl. B1 Certificate, Downgraded to Baa1, previously on 11/20/2008 Aa2 Placed under Review for Possible Downgrade -- Cl. B2 Certificate, Downgraded to Baa2, previously on 11/20/2008 Aa3 Placed under Review for Possible Downgrade -- Cl. B3 Certificate, Downgraded to B1, previously on 11/20/2008 A2 Placed under Review for Possible Downgrade -- Cl. B4 Certificate, Downgraded to Caa2, previously on 11/20/2008 A3 Placed under Review for Possible Downgrade -- Cl. B5 Certificate, Downgraded to Caa3, previously on 11/20/2008 Baa2 Placed under Review for Possible Downgrade -- Cl. B6 Certificate, Downgraded to Ca, previously on 11/20/2008 Baa3 Placed under Review for Possible Downgrade -- Cl. B7 Certificate, Downgraded to Ca, previously on 11/20/2008 Ba2 Placed under Review for Possible Downgrade -- Cl. B8 Certificate, Downgraded to Ca, previously on 11/20/2008 B1 Placed under Review for Possible Downgrade -- Cl. B9 Certificate, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade -- Cl. B10 Certificate, Downgraded to C, previously on 11/20/2008 Caa2 Placed under Review for Possible Downgrade Issuer: RESIX Finance Limited Credit Linked Notes, Series 2005-D -- Cl. B7 Notes, Downgraded to Ca, previously on 11/20/2008 Ba2 Placed under Review for Possible Downgrade -- Cl. B8 Notes, Downgraded to Ca, previously on 11/20/2008 B1 Placed under Review for Possible Downgrade -- Cl. B9 Notes, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade -- Cl. B10 Notes, Downgraded to C, previously on 11/20/2008 Caa2 Placed under Review for Possible Downgrade Issuer: RESI Finance Limited Partnership 2006-A -- Cl. B1 Certificate, Downgraded to A1 Certificate, previously on 11/20/2008 Aa2 Placed under Review for Possible Downgrade -- Cl. B2 Certificate, Downgraded to A2, previously on 11/20/2008 Aa3 Placed under Review for Possible Downgrade -- Cl. B3 Certificate, Downgraded to Ba1, previously on 11/20/2008 A2 Placed under Review for Possible Downgrade -- Cl. B4 Certificate, Downgraded to Ba3, previously on 11/20/2008 A3 Placed under Review for Possible Downgrade -- Cl. B5 Certificate, Downgraded to Caa1, previously on 11/20/2008 Baa2 Placed under Review for Possible Downgrade -- Cl. B6 Certificate, Downgraded to Caa3, previously on 11/20/2008 Baa3 Placed under Review for Possible Downgrade -- Cl. B7 Certificate, Downgraded to Ca, previously on 11/20/2008 B1 Placed under Review for Possible Downgrade Issuer: RESIX Finance Limited Credit Linked Notes, Series 2006-A -- Cl. B7 Notes, Downgraded to Ca, previously on 11/20/2008 B1 Placed under Review for Possible Downgrade Issuer: RESI Finance Limited Partnership 2006-B -- Cl. B1 Certificate, Downgraded to A1, previously on 11/20/2008 Aa2 Placed under Review for Possible Downgrade -- Cl. B2 Certificate, Downgraded to A3, previously on 11/20/2008 Aa3 Placed under Review for Possible Downgrade -- Cl. B3 Certificate, Downgraded to Ba1, previously on 11/20/2008 A2 Placed under Review for Possible Downgrade -- Cl. B4 Certificate, Downgraded to Ba2, previously on 11/20/2008 A3 Placed under Review for Possible Downgrade -- Cl. B5 Certificate, Downgraded to B3, previously on 11/20/2008 Baa1 Placed under Review for Possible Downgrade -- Cl. B6 Certificate, Downgraded to Caa2, previously on 11/20/2008 Baa3 Placed under Review for Possible Downgrade Issuer: RESI Finance Limited Partnership 2006-C -- Cl. B1 Notes, Downgraded to A3, previously on 11/20/2008 Aa2 Placed under Review for Possible Downgrade -- Cl. B2 Notes, Downgraded to Baa2, previously on 11/20/2008 Aa3 Placed under Review for Possible Downgrade -- Cl. B3 Notes, Downgraded to B3, previously on 11/20/2008 A1 Placed under Review for Possible Downgrade -- Cl. B4 Notes, Downgraded to Caa1, previously on 11/20/2008 A2 Placed under Review for Possible Downgrade -- Cl. B5 Notes, Downgraded to Caa3, previously on 11/20/2008 Ba1 Placed under Review for Possible Downgrade -- Cl. B6 Notes, Downgraded to Ca, previously on 11/20/2008 Ba3 Placed under Review for Possible Downgrade -- Cl. B7 Notes, Downgraded to Ca, previously on 11/20/2008 B2 Placed under Review for Possible Downgrade -- Cl. B8 Notes, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade -- Cl. B9 Notes, Downgraded to C, previously on 11/20/2008 Caa2 Placed under Review for Possible Downgrade Issuer: RESIX Finance Limited Credit-Linked Notes, Series 2006-C -- Cl. B7 Certificate, Downgraded to Ca, previously on 11/20/2008 B2 Placed under Review for Possible Downgrade -- Cl. B8 Certificate, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade -- Cl. B9 Certificate, Downgraded to C, previously on 11/20/2008 Caa2 Placed under Review for Possible Downgrade Issuer: RESI Finance Limited Partnership 2007-A -- Cl. B3 Notes, Downgraded to Caa3, previously on 11/20/2008 B1 Placed under Review for Possible Downgrade -- Cl. B4 Notes, Downgraded to Ca, previously on 9/22/2008 Downgraded to B2 and Placed under Review for Possible Downgrade -- Cl. B5 Notes, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade -- Cl. B6 Notes, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible \ Downgrade -- Cl. B7 Notes, Downgraded to Ca, previously on 11/20/2008 Caa2 Placed under Review for Possible Downgrade -- Cl. B8 Notes, Downgraded to C, previously on 9/22/2008 Downgraded to Ca Issuer: RESI Finance Limited Partnership 2007-B -- Cl. B3 Notes, Downgraded to Caa1, previously on 11/20/2008 Baa2 Placed under Review for Possible Downgrade -- Cl. B4 Notes, Downgraded to Caa3, previously on 11/20/2008 Ba1 Placed under Review for Possible Downgrade -- Cl. B5 Notes, Downgraded to Ca, previously on 11/20/2008 Ba2 Placed under Review for Possible Downgrade -- Cl. B6 Notes, Downgraded to Ca, previously on 11/20/2008 Ba3 Placed under Review for Possible Downgrade -- Cl. B7 Notes, Downgraded to C, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade Issuer: RESI Finance Limited Partnership 2007-C -- Cl. B6 Notes, Downgraded to Caa3, previously on 11/20/2008 B1 Placed under Review for Possible Downgrade Issuer: EASI Finance Limited Partnership 2007-1 -- Cl. B-3 Certificate, Downgraded to Ca, previously on 9/22/2008 Downgraded to B1 and Placed under Review for Possible Downgrade -- Cl. B-4 Certificate, Downgraded to Ca, previously on 9/22/2008 Downgraded to B2 and Placed under Review for Possible Downgrade -- Cl. B-5 Certificate, Downgraded to Ca, previously on 9/22/2008 Downgraded to B3 and Placed under Review for Possible Downgrade -- Cl. B-6 Certificate, Downgraded to Ca, previously on 9/22/2008 Downgraded to Caa2 -- Cl. B-7 Certificate, Downgraded to C, previously on 9/22/2008 Downgraded to Ca -- Cl. B-8 Certificate, Downgraded to C, previously on 9/22/2008 Downgraded to Ca -- Cl. B-9 Certificate, Downgraded to C, previously on 9/22/2008 Downgraded to Ca RYLAND GROUP: Fitch Downgrades Issuer Default Rating to 'BB' ------------------------------------------------------------ Fitch Ratings has downgraded Ryland Group, Inc.'s Issuer Default Rating and outstanding debt ratings: -- IDR to 'BB' from 'BB+'; -- Senior unsecured to 'BB' from 'BB+'; -- Unsecured bank credit facility to 'BB' from 'BB+'. The Rating Outlook remains Negative. The downgrade reflects the current very difficult housing environment and Fitch expectations that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings changes also reflect negative trends in RYL's operating margins, further deterioration in credit metrics (especially interest coverage and debt/EBITDA ratios) and erosion in tangible net worth from non-cash real estate charges. However, RYL's liquidity position provides a buffer and supports the new ratings. Fitch notes there is potential for lower cash flow from operations next year relative to fiscal 2008. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. The ratings reflect RYL's successful execution of its business model, moderate financial policies and geographic and product line diversity. In recent years RYL has improved its capital structure, pursued conservative capitalization policies and has positioned itself to withstand a meaningful housing downturn. RYL's significant ranking (within the top five or top ten) in most of its markets, its presale operating strategy and a return on capital focus provide the framework to soften the impact on margins from declining market conditions. Acquisitions have not played a part in RYL's operating strategy, as management has preferred to focus on internal growth (expanding its position in existing markets and occasional greenfield new market entries). RYL's inventory turns remain strong in comparison to the industry, demonstrating the company's ability to generate liquidity from its inventory base. Inventory/net debt stood at 3.2 times at Sept. 30, 2008, above levels of the mid-to-late 1990s (although below the average 5.1x of the 2001-2005 period), providing some buffer against a further downturn in housing and/or in economic conditions. RYL maintains a 3.7-year supply of lots (based on last 12 months deliveries), 74.3% of which are owned and the balance controlled through options. (The options share of total lots controlled is down sharply over the past two years as the company has written off substantial numbers of options.) As the housing cycle continues to contract, creditors should benefit from RYL's financial flexibility supported by cash and equivalents of $344.8 million and $382 million available under its $550 million unsecured credit facility as of Sept. 30, 2008. In June 2008, RYL amended its credit facility to, among other things, reduce the aggregate commitment from $750 million to $550 million and modify the tangible net worth and leverage covenants. The credit facility matures in January 2011. SALLY HOLDINGS: S&P Raises Corporate Credit Rating to B+ From B --------------------------------------------------------------- Standard & Poor's Ratings Services raised its corporate credit and issue-level ratings on Denton, Texas-based Sally Holdings LLC by one notch. The corporate credit rating was raised to 'B+' from 'B.' The rating outlook is stable. "The ratings upgrade is based on Sally's consistent improvement in operating performance over the past year, including a 5% year- over-year increase in revenues, and margins that widened to 17.2% for the year ended Sept. 30, 2008, from 16.2% the prior year," said S&P's credit analyst Jackie Oberoi. "Credit protection measures improved as well, with leverage of 5.9x at year-end and EBITDA interest coverage of 2x." The 'B+' rating reflects Sally's highly leveraged capital structure after its 2007 buyout transaction, thin cash flow protection measures, and participation in the competitive professional beauty supply industry. Sally, with about $2.6 billion in sales in 2008, is the largest distributor of professional beauty supplies in the U.S. The company was spun off from Alberto-Culver Co. in November 2006 in a buyout transaction. At Sept. 30, 2008, Sally operated about 3,600 retail stores, and had 169 franchised stores and more than 1,000 professional distributor sales consultants under two segments: Sally Beauty Supply, a domestic and international chain of cash- and-carry stores offering professional beauty supplies to both salon professionals and retail customers; and BSG, a full-service beauty supply distributor offering professional brands directly to salons through its own sales force and professional-only stores. The market is very fragmented, and competitors include a wide array of retail outlets, such as mass merchandisers, drugstores, and supermarkets, as well as local and regional operators. Trailing-12-month operating margins have consistently improved over the past several quarters and were at 17.2% at fiscal year- end Sept. 30, 2008. Improvements were driven by Sally Beauty Supply's sales leverage and increased sales of higher-margin exclusive label products, offset by higher freight and marketing expenses and continued acquisition integration costs. Credit measures deteriorated substantially following the company's buyout transaction, with leverage of nearly 7x. Leverage improved to less than 6x, and interest coverage was at 2x for the year ended Sept. 30, 2008. Lease-adjusted debt levels exceed $2 billion. SEAGATE TECH: S&P Cuts Senior Unsecured Rating to 'BB-' ------------------------------------------------------- Standard & Poor's Ratings Services lowered the senior unsecured ratings on Seagate Technology HDD Holdings to 'BB-' from 'BB+' and revised the recovery rating on those issues to '3', indicating meaningful recovery (50%-70%) in the event of a payment default, from '4'. At the same time, S&P lowered the senior unsecured rating on Maxtor Corp. to 'B' from 'BB+' and revised the recovery rating to '6', indicating negligible recovery (0-10%) in the event of a payment default, from '4'. The action follows the company's announcement that it expects revenues to decline sequentially in a 14%-24% range in the December quarter and that operating results will be lower than previously expected. "The drop in earnings will pressure the company's net debt-to-EBITDA measure, which is used in a performance covenant in the company's $500 million revolving credit facility," explained S&P's credit analyst Lucy Patricola. The covenant calls for a minimum net debt to EBITDA of 1.5x, and while the company currently is comfortably in compliance -- S&P's estimates the ratio at about 0.4x -- the expected weakness in December earnings likely will significantly diminish headroom. "If operating results for the following quarters remain weak," added Ms. Patricola, "meeting the covenant could be a challenge." SECURUS TECHNOLOGIES: S&P Affirms 'B-' Issue-Level Rating --------------------------------------------------------- Standard & Poor's Ratings Services said it revised the outlook on Dallas-based inmate telecommunications provider Securus Technologies Inc. to stable from negative. At the same time, S&P affirmed the company's 'B-' corporate credit rating and the 'B-' issue-level and '4' recovery rating on its second-lien notes. Total funded debt at Sept. 30, 2008, was $274 million. "The revision in outlook to stable reflects our view that the company is likely to generate sufficient EBITDA on an ongoing basis to meet its minimum financial maintenance interest covenant of 1.75x on its second-lien notes," said S&P's credit analyst Catherine Cosentino. Since early 2008, Securus' EBITDA levels have grown sufficiently to provide adequate cushion on an ongoing basis. "Furthermore," added Ms. Cosentino, "it refinanced its revolving credit facility with a new facility which provides additional liquidity." The 'B-' rating reflects the company's highly leveraged financial risk profile and a narrow focus within a competitive and evolving niche marketplace. A largely recurring revenue base, supported by long-term customer contracts, fails to mitigate these risks. Securus is one of the two leading independent providers of inmate telecommunications services to corrections facilities operated by city, county, state, and federal authorities in the U.S. and Canada. It has been competing aggressively with several other independent providers in this narrow, approximately $1.4 billion market, for business traditionally held by the regional Bell operating companies, local exchange carriers, and inter-exchange carriers, most of whom have exited the corrections services market in the past few years. SIMMONS BEDDING: Lenders Extend Forbearance Period to March 2009 ---------------------------------------------------------------- Simmons Bedding Company, a subsidiary of Simmons company, and its senior lenders have agreed to extend the company's forbearance period through the end of March 2009, subject to the terms of the parties' agreement. The forbearance period extension is designed to provide Simmons with sufficient time to reduce the debt on its balance sheet through an organized financial restructuring. In agreeing to extend the forbearance period, Simmons' lenders have demonstrated their confidence in the company's ability to implement the financial restructuring in a way that maximizes value for all of its constituencies, including lenders, customers and suppliers. Simmons President and Chief Operating Officer Steve Fendrich stresses that the company's restructuring will not affect retailers' day to day business relationship with the company. "We expect that the restructuring will be invisible to our retailers and suppliers and it will not have any impact on the way we bring products to market, service our retailers or manufacture goods. It's our intention that Simmons will be a stronger and more financially sound company as a result." Mr. Fendrich continued, "This past year has been difficult for the entire bedding industry. However, the steps that we're taking now will allow Simmons to remain an industry leader. Our marketing and product development fundamentals are extremely sound; they've carried us through 11 consecutive quarters of growth that have outpaced the industry and helped Simmons to gain market share." Simmons will continue its tradition of innovation with the launch of several new products and retail marketing concepts at the Las Vegas Furniture Market in February. Simmons has said it plans to work with its various stakeholders to design and implement the restructuring in a manner that maximizes value and preserves and protects its relationships with customers and suppliers. On December 10, 2008, Simmons company's subsidiaries, Simmons Bedding company, THL-SC Bedding company and certain subsidiaries of Simmons Bedding party to its senior credit facility, entered into the Second Forbearance Agreement; Third Amendment to the Second Amended and Restated Credit and Guaranty Agreement and First Amendment to the Pledge and Security Agreement with its senior lenders and Deutsche Bank AG, as a senior lender and administrative agent for the senior lenders. As of December 9, 2008, the aggregate principal balances of the company's loans and aggregate face amount of its letters of credit were: Tranche D Term Loans $465,000,000 Revolving Loans $64,532,384 Letters of Credit $10,427,327 The company and each Credit Party agree that as of December 9, the aggregate amount of accrued and unpaid interest on the Tranche D Term Loans and Revolving Loans is $3,931,276, and the accrued and unpaid commitment fees payable pursuant to the Credit Agreement is $65.87 and the accrued and unpaid letter of credit fees payable is $42,540. The amounts do not include other fees, expenses and other amounts which are chargeable or otherwise reimbursable under the Credit Agreement and the other Credit Documents. None of the company and the other Credit Parties have any rights of offset, defenses, claims or counterclaims with respect to any of the Obligations and each of the Credit Parties are jointly and severally obligated with respect thereto, in accordance with the terms of the Credit Documents. Pursuant to the Second Forbearance Agreement, Simmons covenants with the lenders not to permit: (i) the sum of the Cash and Cash Equivalents of the company and all of its Domestic Subsidiaries at the close of business on any Business Day to be less than $2.5 million on any two consecutive Business Days; or (ii) the average Daily Cash Balance for any five consecutive Business Days to be less than $7.5 million. The company will deliver to the Agent commencing with the week of December 15, 2008, a report of the Daily Cash Balances as a consolidated number for each Business Day of the preceding week, certified by the company's chief financial officer or other financial officer of the company that is a Responsible Officer. The company is also required to deliver a long-term business plan approved by the company's Board of Directors to the Agent by no later than January 7, 2009, which will include (i) forecasted consolidated balance sheets -- assuming a static capitalization -- and forecasted consolidated statements of income and cash flows of the company and its Subsidiaries for the next succeeding 3 Fiscal Years, together with an explanation of the material assumptions on which such forecasts are based and (ii) forecasted consolidated statements of income and cash flows of the company and its Subsidiaries for each month of the Fiscal Year ending in 2009, together with an explanation of the material assumptions on which such forecasts are based. The company was to commence on January 9, 2009, distribution of marketing materials to solicit potential debt or equity investments. On or before January 26, 2009, the company is required deliver a potential restructuring proposal approved by the company's Board of Directors to the Agent. A full-text copy of the Second Forbearance Agreement is available at no charge at: http://ResearchArchives.com/t/s?3642 Headquartered in Atlanta, Georgia, Simmons company -- http://www.simmons.com/-- is a mattress manufacturer and marketer of a range of products through its indirect subsidiary Simmons Bedding company. Products includes Beautyrest(R), Beautyrest Black(TM), ComforPedic by Simmons(TM), Natural Care(TM), BackCare(R), Beautyrest Beginnings(TM) and Deep Sleep(R). Simmons Bedding company operates 21 conventional bedding manufacturing facilities and two juvenile bedding manufacturing facilities across the United States, Canada and Puerto Rico. Simmons also serves as a key supplier of bedding to hotel groups and resort properties. SLANE 840: Auction Sale of Pledged Collateral Set for Jan. 7 ------------------------------------------------------------ CPI Pool II Funding, LLC, a Delaware limited liability company, will sell at a public auction on Jan. 7, 2009, the property securing the obligations owed to it by Slane 840 Weschester Ave., LLC. The auction will be held in Room 130 of the New York County Courthouse, 60 Centre Street, in New York. The property consists of 100% of all rights, title and interest which The Slane Company, Ltd., an Ohio limited liability company, and Westchester Investment LLC, an Ohio limited liability, have in the Borrower; and 100% of all rights, title and interest which the Borrower has in Slane properties, LLC, a New York limited liability company. For a more detailed description of the Pledged Collateral and for certain information concerning the Pledgors and the Property, please contact: Barry G. Margolis, Esq. Email: bmargolis@agmblaw.com Abrams Garfinkel Margolis Bergson, LLP 237 West 35th Street, Fourth Floor, New York City Tel: (212) 201-1174 Slane 840 Westchester Ave., LLC, a New York limited liability company, is the sole member of Slane Properties, LLC, a New York limited liability company which is the ground lessee of land known as Block 2689, Lots, 1, 47 and 48 located at 854 Westchester Avenue, the Bronx, in New York. SPECIAL DEVICES: Fails to Refinance Debt, Files for Chapter 11 -------------------------------------------------------------- Dawn McCarty and Bob Van Voris at Bloomberg News reports that Special Devices Inc. has filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware, after failing to refinance $73.6 million in debt. According to court documents, Special Device's Chief Financial Officer Harry Rector III said, "During 2008, SDI explored a number of refinancing options with respect to the senior subordinated notes. However by late November 2008 it became clear that any such refinancing could not be implemented." Court documents say that Special Devices listed debts of $103.6 million and assets of $53.1 million on a consolidated basis as of July 27, 2008. Bloomberg relates that Special Devices owes about $13.2 million under a pre-bankruptcy loan agreement. Bloomberg reports that Special Devices will borrow $22.5 million from Wayzata Investment Partners LLC, as agent, and will use the money to fund its Chapter 11 reorganization. Court documents say that Special Devices is also asking for the Court's permission to borrow as much as $3 million on an interim basis. Special Devices has secured over $20 million of debtor-in- possession financing, from its largest creditor, Wayzata Investment Partners LLC. "This financing supplements the company's cash availability and provides the liquidity and funding necessary to carry out this balance sheet restructuring. We are pleased to have the support of our largest creditor in this process," Special Devices President and CEO Christopher Hunter. The company would submit the agreements to the Court for approval as part of its First Day Motions. Special Devices sought Court approval for various, customary First-Day Motions, including: -- maintaining employee payroll and health benefits; -- the fulfillment of certain pre-filing obligations; -- the continuation of the company's cash management system; and -- the ability to honor all customer programs. Special Devices anticipates its First-Day Motions to be approved in the next few days. Special Devices will continue to operate all of its three business units during the restructuring. The company said that it has sufficient cash to do so. Mr. Hunter said, "Factors beyond our control have resulted in a financial tsunami -- a significant decline in automotive related revenue and a tough global economy coupled with a credit crisis that makes it extremely difficult to support our debt structure. We believe that this restructuring will bring the level of our debt in line with current economic realities, and will allow the business to continue to provide world-class pyrotechnic products and related services to our customers around the world. This restructuring effort is focused on our capital structure, not our operations." Moorpark, California-based Special Devices Inc. -- http://www.specialdevices.com/-- was founded in the 1950s to manufacture explosives for film special effects, also makes initiators for the defense and mining industries. The company makes a component that causes car air-bags to deploy. SPANSION INC: Fitch Sees Likely Default, Junks Ratings on $1B Debt ------------------------------------------------------------------ Fitch Ratings has downgraded these ratings for Spansion Inc.: -- Issuer Default Rating) to 'CCC' from 'B-'; -- $175 million senior secured revolving credit facility (RCF) due 2010 to 'CCC+/RR3' from 'B/RR3'; -- $625 million senior secured floating rating notes due 2013 to 'CCC+/RR3' from 'B/RR3'; -- $225 million of 11.25% senior unsecured notes due 2016 to 'CC/RR6' from 'CCC/RR6'; -- $207 million of 2.25% convertible senior subordinated debentures due 2016 to 'CC/RR6' from 'CCC-/RR6'. The Rating Outlook is Negative. Approximately $1.3 billion of debt securities are affected by Fitch's actions. The downgrade and Negative Rating Outlook reflect Fitch's belief that there is a real possibility Spansion will default over the near-term, due to a combination of a challenging macroeconomic environment and the company's weak liquidity position. Fitch believes Spansion's survival over the next 12 months will depend upon a combination of better than expected demand and pricing environment, ability to renew the RCF in Japan, obtain a line of credit related to the ARS settlement, and asset sales. Fitch expects double digit revenue decline for Spansion in 2009, driven by ongoing pricing pressures that will be exacerbated by meaningfully lower consumer spending on electronics over the near- term. In particular, Fitch expects mobile phone units and automotive electronics, end markets representing well over half of Spansion's unit shipments, to decline meaningfully in 2009. The resultant significantly lower gross profits will drive negative free cash flow in 2009, despite the company's aggressive cost cuts, including slashing discretionary capital spending. This anticipated cash usage will erode Spansion's already weak liquidity, which as of Sept. 28, 2008 was supported by approximately $152 million of cash and cash equivalents and approximately $100 million of availability under various credit facilities. The company also has approximately $125 million of debt amortization and approximately $60 million due under capital leases through the end of 2009. Furthermore, as of Sept. 28, 2008, approximately $75 million was outstanding under the company's Spansion Japan revolving credit facility, expiring in December 2009. This facility comprises approximately $50 million of the aforementioned $100 million of the company's available credit, and the terms and conditions of the related credit agreement provide for annual renewal. In addition, Spansion has approximately $38.4 million available under the U.S. RCF. However, Fitch expects availability will be reduced by the facility's borrowing base roughly commensurate with anticipated sales declines. Cash balances exclude approximately $107 million of auction rate securities classified as marketable securities that Fitch considers illiquid at present. However, the ARS portfolio could provide additional liquidity, as the company has the opportunity to participate in a settlement with UBS providing for the repurchase of these securities beginning in June 2010. Spansion is in discussions with lenders regarding a line of credit against the anticipated settlement of up to 75% of market value of the ARS portfolio. Fitch believes further negative rating actions could be driven by: faster than anticipated erosion of cash balances, driven by weaker than expected operating results; or the company's inability to bolster liquidity via refinancing the RCF in Japan, securing the ARS-related line of credit, or selling assets. The ratings could be stabilized if: operating results meaningfully outperform Fitch's current expectations, resulting in at worst modest cumulative cash burn through at least the end of 2009; and the company successfully renews its RCF in Japan, obtains the ARS- related funding, and receives meaningful proceeds from asset sales. Total debt as of Sept. 30, 2008 was approximately $1.6 billion and consisted primarily of: i) approximately $272 million outstanding under Spansion Japan's, a wholly-owned subsidiary of Spansion Inc., senior secured credit facility expiring Dec. 16, 2010; ii) approximately $55 million outstanding under Spansion Inc.'s $175 million senior secured RCF expiring Sept. 19, 2010, the availability of which has been reduced by a combination of a lower borrowing base and $35 million due to EBITDA levels falling below prescribed minimum levels; iii) approximately $75 million outstanding under Spansion Japan's senior secured RCF expiring Dec. 28, 2009; iv) approximately $625 million of floating rate senior secured notes due 2013; v) approximately $225 million of 11.25% senior unsecured notes due 2016; vi) $207 million of 2.25% exchangeable senior subordinated debentures due 2016; and vii) approximately $80 million of other debt, including capital leases. The Recovery Ratings and notching reflect Fitch's expectation that Spansion's enterprise value, and hence recovery rates for its creditors, will be maximized as a going concern rather than as in liquidation under a distressed scenario, although the difference between the two continues to shrink. Fitch's analysis assumes Spansion ability to draw against its bank credit facilities will remain constrained by covenants, reducing availability under its U.S. RCF by $35 million due to EBITDA falling below prescribed levels, as well as the current borrowing base. Fitch has reduced the discount to operating EBITDA (in estimating distressed operating EBITDA)to 0% from 25% due to Fitch's expectations that Spansion's profitability will decline meaningfully in the fourth quarter, resulting in an already distressed operating EBITDA amount of approximately $210 million for the full fiscal year of 2008. Fitch believes $800 million of rated senior secured debt, including $625 million of senior secured floating rate notes and a fully drawn $175 million U.S. revolving bank credit facility, will recover 51%-70% in a reorganization scenario, resulting in a 'RR3' recovery rating. A waterfall analysis provides 0% recovery for the approximately $225 million of rated senior unsecured debt and $207 million of senior subordinated notes, both resulting in a recovery rating of 'RR6'. SPECIAL DEVICES: Case Summary & 30 Largest Unsecured Creditors -------------------------------------------------------------- Debtor: Special Devices, Incorporated 14370 White Sage Road Moorpark, CA 93021 Bankruptcy Case No.: 08-13312 Related Information: The Debtor designs and makes energetic devices. The Debtor's business is comprised of three segments: (i) automotive business unit; (ii) defense and aerospace business unit; and mining and blasting unit. See: http://www.specialdevices.com/ Chapter 11 Petition Date: December 15, 2008 Court: District of Delaware (Delaware) Judge: Mary F. Walrath Debtor's Counsel: Jason M. Madron, Esq. madron@rlf.com Mark D. Collins, Esq. collins@RLF.com Richards, Layton & Finger, P.A. One Rodney Square P.O. Box 551 Wilmington, DE 19899 Tel: (302) 651-7595 Fax: (302) 651-7701 Special Corporate Counsel: Gibson, Dunn & Crutcher LLP Claims Agent: Kurztman Carson Consultants LLC Estimated Assets: $50 million to $100 million Estimated Debts: $50 million to $100 million The petition was signed by chief financial officer Harry Rector. The Debtor's Largest Unsecured Creditors: Entity Nature of Claim Claim Amount ------ --------------- ------------ United States Trust Company $77,779,658 of New York 114 West 47th Street 25th Floor New York, NY 10036 Tel: (212) 852-1674 Schott Electronic Packaging $1,839,344 LA Dvorkova 997, CR-56301 Lanskroun, Czech Republic Tel: (303) 277-4525 AR Hermetic Seal Corporation $1,807,862 4234 Temple City Blvd. Rosemead, CA 91770 Tel: (626) 443-8931 Wiley Rein LLP $1,622,320 1776 K. Street NW Washington, DC 20006 Tel: (202) 719-7240 JF Lehman & Company Inc. $553,466 2001 Jefferson Davis Highway Suite 607 Arlington, VA 22202 Tel: (703) 418-6099 Truelove & MacLean Inc. $325,281 Ventura County Tax $215,146 Machine Laboratory LLC $175,534 Braxton Manufacturing Co. Inc. $130,745 Law Offices of Fennemore $127,302 Craig TAC Worldwide Companies $117,966 NetApp Financial Solutions $103,000 Genesis Plastics Tech, Inc. $96,110 Cesaroni Technology Inc. $92,148 Daicel Safety Systems LLC $85,536 Blank Rome LLP $83,569 Chemetall Foote $75,281 Brown & White LLP $73,853 Applimonton Inc. $71,780 Marman Industries Inc. $71,500 GCA Services Group Inc. $70,953 Viering, Jentschura & Partner $70,784 DMC Manufacturing Corp. $69,807 Polyone Distribution $59,272 National Technical Services $57,470 Chemetall Foote Corp. $55,725 Precision Hermetic Technology $51,890 PricewaterhouseCoopers $50,000 Accratronics Seal Corp. $49,636 ProPak $46,658 Seacor Piezo Ceramics $43,398 STANDARD PACIFIC: Fitch Affirms Issuer Default Rating at 'B-' ------------------------------------------------------------- Fitch Ratings has affirmed Standard Pacific Corp.'s Issuer Default Rating and outstanding debt ratings: -- IDR at 'B-'; -- Secured borrowings under bank revolving credit facility at 'BB-/RR1'; -- Unsecured borrowings under bank revolving credit facility at 'B-/RR4'; -- Senior unsecured at 'B-/RR4'; -- Senior subordinated debt at 'CCC/RR6'. SPF's Outlook is Stable. Fitch's 'RR1' Recovery Rating on the secured advances under SPF's revolving credit facility indicates outstanding (90%-100%) recovery prospects for holders of this debt issue. The 'RR4' on SPF's unsecured notes and the unsecured advances under its revolving credit facility indicate average (30%-50%) recovery prospects for holders of these debt issues. Standard Pacific's exposure to claims made pursuant to performance bonds and joint venture debt and the possibility that a portion of these contingent liabilities would have a claim against the company's assets were considered in determining the recovery for the unsecured debt holders. The 'RR6' on SPF's senior subordinated notes indicate poor recovery prospects (0%-10%) in a default scenario. Fitch applied a liquidation value analysis for these RRs. The ratings reflect the current difficult U.S. housing environment (especially in SPF's key California and Florida markets) and Fitch's expectation that housing activity will be even more challenging than previously anticipated throughout calendar 2009. The recessionary economy and impaired mortgage markets are, of course, contributing to the housing shortfall. The ratings also reflect current and expected negative trends in SPF's operating margins and meaningful deterioration in credit metrics (particularly interest coverage, debt/EBITDA ratios and tangible net worth). There is potential for lower cash flow from operations next year relative to fiscal 2008. The Stable Outlook reflects the company's strengthened balance sheet and improved liquidity position resulting from the recent equity investment made by Matlin Patterson as well as the completion of a previously announced rights offering. Standard Pacific ended the September quarter with $712 million of cash on the balance sheet and approximately $200 million of availability under its revolving credit facility. SPF amended its bank credit facilities on June 27, 2008. As part of the amendment, the commitments under the revolving credit facility were reduced from $500 million to $395 million and the company paid down its revolver balance from $90 million to $55 million and its Term Loan A balance from $100 million to $65 million. Additionally, certain financial covenants, including leverage, interest coverage and tangible net worth requirements, were eliminated. The amended credit facilities contain a new liquidity test requiring SPF to maintain either a minimum ratio of cash flow from operations to interest incurred or a minimum liquidity reserve. SPF's improved liquidity position, including a less restrictive covenant structure under its bank credit facilities, allows the company to fund working capital needs and meet upcoming debt maturities, including required quarterly amortizations, during the remainder of 2008 and first half-2009. SPF paid down $103 million of notes that came due in October 2008 and has $125 million of unsecured notes coming due in April, 2009. SPF and its JV partners generally provide credit enhancements in connection with JV borrowings in the form of loan-to-value maintenance agreements. At Sept. 30, 2008, approximately $245 million of its unconsolidated JV borrowings were subject to these credit enhancements. SPF is solely responsible for $16.6 million and is jointly and severally responsible (with its partners) for $228.4 million of debt. While the company has reduced its joint venture exposure, SPF's liquidity may be negatively impacted by potential re-margining contributions as well as cash outflow from unwinding certain JVs. Future ratings and Outlooks will be influenced by broad housing market trends as well as company specific activity, such as land and development spending, general inventory levels, speculative inventory activity (including the impact of high cancellation rates on such activity), gross and net new order activity, debt levels and free cash flow trends and uses. STANDARD STEEL: Moody's Affirms 'B2' Corporate Family Rating ------------------------------------------------------------ Moody's Investors Service has affirmed the B2 corporate family and probability of default ratings of Standard Steel, LLC. The rating outlook is stable. The B2 affirmation balances a good level of 2008 free cash flow, a substantial proportion of 2009 manufacturing capacity covered under take-or-pay contracts, and the existence of robust raw material pricing surcharge contract provisions, against high leverage, small size, high customer concentration, and exposure to a weakening new rail car build market. The stable outlook reflects Moody's expectation of a sustained adequate liquidity profile, debt reductions from prepayments and via excess cash flow repayment provisions, the high proportion of contracted 2009 sales, and the view that replacement wheel demand should sustain revenues near term though new car build rates may falter. Nevertheless, due to the recession's potential impact on the overall rail industry, the outlook will be sensitive to underperformance and liquidity profile decline. Since Standard Steel's first lien credit facility has aggressive financial ratio covenant test step-downs upcoming, ability to meet expected production volumes, margins and cash flow generation will be critical to maintaining the adequate liquidity profile. In addition to the affirmed B2 corporate family and probability of default ratings, these ratings were affirmed, with loss given default assessment rates changing: -- 20 million first lien revolving credit facility due 2011: B2 LGD 3, to 45% from 44% -- $100 million first lien term loan due 2012: B2 LGD 3, to 45% from 44% -- $20 million first lien delayed draw term loan due 2012: B2 LGD 3, to 45% from 44% -- $25 million second lien term loan due 2013: Caa1 LGD 6, unchanged at 92% Standard Steel's ratings were assigned by evaluating factors Moody's believe are relevant to the credit profile of the issuer, such as i) the business risk and competitive position of the company versus others within its industry, ii) the capital structure and financial risk of the company, iii) the projected performance of the company over the near to intermediate term, and iv) management's track record and tolerance for risk. These attributes were compared against other issuers both within and outside of Standard Steel's core industry and Standard Steel's ratings are believed to be comparable to those of other issuers of similar credit risk. Moody's last rating action on Standard Steel, LLC took place on June 23, 2008 when the B2 corporate family rating was affirmed. Standard Steel, LLC, based in Burnham, Pennsylvania, manufactures forged wheels and axles used in freight and passenger rail cars and locomotives. The company had last twelve month September 2008 revenues of approximately $221 million. SUPER SAVE: Voluntary Chapter 15 Case Summary --------------------------------------------- Chapter 15 Petitioner: Barry Anthony Taylor Chapter 15 Debtor: Super Save Superannuation Fund (In Liquidation) HLB Mann Judd level 19, 207 Kent Street Sydney, New South Wales Australia Chapter 15 Case No.: 08-12832 Type of Business: The Debtor engages in investment schemes. Chapter 15 Petition Date: December 12, 2008 Court: Southern District of New York (Manhattan) Judge: Allan L. Gropper Chapter 15 Petitioner's Counsel: Andrew T. Solomon, Esq. asolomon@sandw.com Sullivan & Worcester LLP 1290 Avenue of the Americas 29th Floor New York, NY 10104 Tel: (212) 660 3000 Fax: (212) 660 3001 Estimated Assets: $1 million to $10 million Estimated Debts: $1 million to $10 million SYNCORA HOLDINGS: NYSE Suspends Common Stock Trading on Dec. 17 --------------------------------------------------------------- Syncora Holdings Ltd. was notified by the NYSE Regulation, Inc., that as a result of the company's common shares no longer meeting the New York Stock Exchange continued listing standards, the NYSE will suspend trading of Syncora's common stock effective on the NYSE's opening on Dec. 17, 2008. Syncora does not intend to appeal the NYSE's decision at this time and, consequently, it is expected that the common stock will be delisted following the NYSE's application to the Securities and Exchange Commission. In particular, Syncora has been advised that its shares are out of compliance with two of the NYSE's continued listing standards: i) maintaining an average market capitalization of not less than $75 million over a consecutive 30 trading-day period and a stockholders' equity of not less than $75 million; and ii) maintaining an average closing price of not less than $1.00 over a consecutive 30 trading-day period. The company expects that its common stock will be quoted on the Financial Industry Regulatory Authority's over-the-counter bulletin board and on the Pink Sheets Inc.'s Pink Quote System. A new ticker symbol will be assigned on the day trading is suspended from the NYSE. The delisting from the NYSE does not represent any change in the company's current strategic plan, in the negotiations with the financial counterparties or in the involvement by the New York State Insurance Department in the company's operations. About Syncora Holdings Ltd. Based in Hamilton, Bermuda, Syncora Holdings Ltd. (NYSE: SCA) -- http://www.syncora.com/-- fka Security Capital Assurance Ltd. is a monoline financial guarantee insurance provider, and Syncora Guarantee Re Ltd. (formerly XL Financial Assurance Ltd.), a monoline provider of reinsurance to financial guarantee insurers that provides credit enhancement for the obligations of debt issuers worldwide. Going Concern Doubt In the opinion of the company, the principal factors which affect the company's ability to continue as a going concern are: (i) its ability to successfully reach agreements with Financial Counterparties and other parties to commute, terminate or restructure the company's CDS contracts and policies on terms satisfactory to the company, well as to address the company's public finance business to the satisfaction of the New York Superintendent of Insurance, (ii) the risk of adverse loss development on its remaining in-force business not so commuted, terminated or restructured (particularly in regard to its exposure to residential mortgages) that would cause it not to be in compliance with its $65 million minimum policyholders' surplus requirement under New York state law, and (iii) the risk of intervention by the NYID as a result of the financial condition of Syncora Guarantee. As a result of uncertainties associated with these factors affecting the company's ability to continue as a going concern, management has concluded that there is substantial doubt about the ability of the company to continue as a going concern. TENSYR LTD: Moody's Downgrades Ratings on Two Note Classes to Ca ---------------------------------------------------------------- Moody's Investors Service has downgraded its ratings of two classes of notes issued by Tensyr Ltd.: US$255,000,000 Class S Floating Rate Notes due 2013 -- Current Rating: Ca -- Prior Rating: Aaa -- Date of Last Rating Action: 02/15/2007 US$91,500,000 Class M Floating Rate Notes due 2013 -- Current Rating: Ca -- Prior Rating: Aaa -- Date of Last Rating Action: 02/15/2007 This transaction is a Collateralized Fund Obligation that is backed by shares in Fairfield Sentry Ltd., a hedge fund which invested almost all of its assets in an account managed by Bernard L. Madoff through his broker-dealer and investment adviser firm, Bernard L. Madoff Investment Securities LLC. According to Moody's, the rating action was precipitated by the filing on December 11, 2008 of a securities fraud complaint by the S.E.C. against both Madoff and BMIS. According to the S.E.C. complaint, Madoff falsely represented to investors that returns were being earned on their accounts at BMIS because of investments he was making, when in actuality Madoff was paying earlier investors with funds raised from later investors. The S.E.C. complaint also alleges that Madoff admitted to senior employees of BMIS that the adviser business of BMIS losses amount to $50 billion, far exceeding BMIS's assets. According to the complaint, the S.E.C. is seeking an Order from the United States District Court in the Southern District of New York to temporarily appoint a receiver for the assets of BMIS and to freeze the assets of Madoff and BMIS. The downgrade to Ca reflects Moody's expectation that the likely asset freeze will seriously impair Tensyr Ltd.'s ability to make payments on the rated notes. The downgrade also reflects Moody's expectation of potentially substantial losses to investors in the notes. TPG-AUSTIN: Fearful Lehman's Inaction Will Cue Own Ch. 11 Filing ----------------------------------------------------------------- Unless the Bankruptcy Court overseeing Lehman Brothers's chapter 11 cases allows TPG-Austin Portfolio Holdings LLC to obtain alternative financing or is otherwise able to reach a workable agreement with Lehman, "within the next few weeks, TPG-Austin may be forced to consider its own chapter 11 bankruptcy case due to Lehman Commercial Paper, Inc.'s failure to fulfill its commitment" to lend under the terms of a 2007 Revolving Loan facility. This disclosure appears in a pleading filed in Lehman Brothers' chapter 11 cases by Theodore B. Stolman, Esq., at Stutman, Treister & Glatt, P.C. Last month, TPG-Austin asked the U.S. Bankruptcy Court for the Southern District of New York to compel Lehman Commercial Paper Inc., to either assume or reject the credit agreement that funds the continued operation of 10 Class A office buildings in Austin, Texas. The properties were acquired for about $1.2 billion from the affiliates of The Blackstone Real Estate Advisors by TPG-Austin Portfolio Syndication Partners JV, a partnership comprised of Thomas Properties Group, the California State Teachers Retirement System and Lehman Brothers Holdings. The partnership owns a series of limited liability companies, which own 100% of TPG-Austin Portfolio Holdings. Based on TPG-Austin Portfolio Holdings' current flow projection, the company will run out of cash by January next year, when an approximate $19 million property tax bill comes due. Lehman says that it hasn't had enough time to make a decision about whether to assume or reject the loan agreement and TPG- Austin hasn't presented evidence of any compelling circumstances or significant prejudice that should result in being compelled to make a quick decision. Those statements appear in an objection filed with the Bankruptcy Court by Michael P. Kessler, Esq., at Weil, Gotshal & Manges LLP. About TPG-Austin TPG-Austin is an affiliate of Thomas Properties Group, Inc. (NASDAQ: TPGI). TPG-Austin owns a portfolio of ten properties totaling 3.5 million square feet in Austin, Texas. TPGI, indirectly through its joint venture with the California State Teachers Retirement System (CalSTRS), holds a 6.25% interest in TPG-Austin. An affiliate of Lehman Brothers currently owns 50% of the equity in the Austin portfolio. Lehman Commercial Paper, Inc. is the loan syndication agent on a $292.5 million Credit Agreement under which TPG-Austin is the borrower. Under the Credit Agreement, a $192.5 million term loan was fully funded, and a $100 million revolving credit facility remains unfunded. TPGI issued a borrowing notice for the full $100 million revolving loan under the Credit Agreement and subsequently issued a notice of default. For more information on Thomas Properties Group, Inc., visit http://www.tpgre.com/ TRIBUNE CO: Wants to Enjoin Utilities From Ceasing Services ----------------------------------------------------------- Tribune Co. asks approval from the U.S. Bankruptcy Court for the District of Delaware to enjoin utility providers from halting services due to its bankruptcy filing. In connection with the operation of the Debtors' businesses and management of their properties, they incur utility expenses for water, sewer service, electricity, gas, local and long-distance telecom service, data service, fiber transmission, waste disposal, and other similar services. The Debtors spend about $5,510,000 for Utility Services on a monthly basis. A list of the Debtors' Utility Providers can be accessed for free at http://bankrupt.com/misc/Tribune_UtilityProviders.pdf Norman L. Pernick, Esq., at Cole, Schotz, Meisel, Forman & Leonard, P.A., in Wilmington, Delaware, proposed attorney for the Debtors, tells the Court that a disruption of the utility services at any of the Debtors' facilities would likely be costly and harmful to the Debtors' business, as they would be forced from the outset to focus on finding replacement Utility Providers. By this Motion, the Debtors ask the Court to prohibit the Utility Providers from altering, refusing, or discontinuing service on account of prepetition invoices, including the making of demands for security deposits or accelerated payment terms. Mr. Pernick says the Debtors intend to pay all postpetition obligations to the Utility Providers in a timely manner, consistent with the ordinary course of operating their businesses. To provide adequate assurance of payment for future services to the Utility Providers, the Debtors propose to deposit an initial sum of $2,755,000, which is 50% of their estimated average monthly cost of Utility Services, into an interest- bearing, newly-created, segregated account on December 28, 2008. Mr. Pernick asserts that the Adequate Assurance Deposit constitutes sufficient adequate assurance to the Utility Providers. However, to ensure that all Utility Providers receive adequate notice of Adequate Assurance, the Debtors propose: (a) to serve a copy of the Utility Motion on each of the Utility Provider within three business days after the entry of the Interim Order by the Court; (b) that if a Utility Provider is not satisfied with the Adequate Assurance Deposit provided by the Debtors, it must serve a request for additional adequate assurance to the Debtors; (c) that any additional assurance request must (i) be in writing, (ii) set forth the location for which Utility Services are provided, (iii) include a summary of the Debtors' payment history relevant to the affected accounts, and (iv) set forth why the Utility Provider believes that the Proposed Adequate Assurance is not sufficient; (d) that without further Court order, the Debtors may enter into agreements granting additional adequate assurance to a Utility Provider serving an additional assurance request, if the Debtors determine that additional assurance is reasonable; (e) that if the Debtors determine that the additional assurance is not reasonable, the Debtors will request a hearing before the Court; (f) that pending a resolution of dispute at the Determination Hearing, the relevant Utility Provider will be restrained from altering, refusing, or discontinuing service to the Debtors; and (g) that the Adequate Assurance will be deemed adequate assurance of payment for any Utility Provider that fails to make an Additional Assurance Request. About Tribune Company Headquartered in Chicago, Illinois, Tribune Company -- http://www.tribune.com/-- is a media company, operating businesses in publishing, interactive and broadcasting, including ten daily newspapers and commuter tabloids, 23 television stations, WGN America, WGN-AM and the Chicago Cubs baseball team. The company and 110 of its affiliates filed for Chapter 11 protection on December 8, 2008 (Bankr. D. Del. Lead Case No. 08-13141). The Debtors proposed Sidley Austion LLP as their counsel; Cole, Schotz, Meisel, Forman & Leonard, PA, as Delaware counsel; Lazard Ltd. and Alvarez & Marsal North Americal LLC as financial advisors; and Epiq Bankruptcy Solutions LLC as claims agent. As of Dec. 8, 2008, the Debtors have $7,604,195,000 in total assets and $12,972,541,148 in total debts. VENOCO INC: S&P Keeps B Subordinate Debt Rating; Outlook Stable --------------------------------------------------------------- Standard & Poor's Ratings Services said that, following an industry review of oil and gas exploration and production companies, it revised the outlook to stable from positive on a number of speculative-grade companies while affirming the ratings. The review was prompted by S&P's recent revision of its oil and gas pricing assumptions in light of the rapid decline in hydrocarbon prices and S&P's expectation that lower prices will prevail for the near to medium term. S&P revised the outlook on Forest Oil Corp. (BB-) to stable from positive because S&P expects worsening credit metrics. At S&P's 2009 pricing assumptions, S&P expects debt to EBITDA to be roughly 3x, which well exceeds S&P's published upgrade trigger of 2x. In addition to the lower pricing assumptions, Forest's debt is higher than S&P previously expected because the company has not been able to consummate anticipated asset sales. Liquidity should remain adequate in 2009. S&P expects Forest to lower its capital budget from the 2008 level to be in line with internally generated cash flows. S&P revised the outlook on Whiting Petroleum Corp. (BB-) to stable from positive. Although the company has reported significant production growth throughout 2008, primarily in the Bakken oil formation in the northern U.S.), positive rating momentum has stalled because of the lower price environment. Furthermore, Whiting is vulnerable to further price declines because of its minimal hedge position in 2009. S&P does highlight, though, that the company's liquidity position of about $400 million as of Sept. 30, 2008, and its significant covenant cushion are adequate for the rating. On Clayton Williams Energy Inc. (B) S&P revised the outlook to stable from positive because of weaker credit measures, in light of S&P's revised crude oil and natural gas price assumptions. Although near-term liquidity remains adequate, the outlook revision reflects S&P's expectation that Clayton Williams will not be able to sustain its recent financial performance in the near term. S&P also expect Clayton's operating cash flows to weaken, given the company's "unhedged" position in 2009 and a relatively high cost structure. The revision of the outlook on Venoco Inc. (B) to stable from positive stems from falling commodity prices. This decline reduces S&P's confidence that credit measures will improve materially in the near term. The company is selling or monetizing (through a volumetric production payment) its interest in the Hastings complex to Denbury Resources Inc. (BB/Stable/--), which will likely result in debt repayment and increase availability under the revolving credit facility. However, the lower price environment will probably reduce the proceeds. Ratings List Ratings Affirmed, Outlook Revised Clayton Williams Energy Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sr unsecd B+ B+ Recovery 2 2 Forest Oil Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sr unsecd B+ B+ Recovery 5 5 Venoco Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sub debt B B Recovery 3 3 Whiting Petroleum Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sub debt BB- BB- Recovery 3 3 VESTA INSURANCE: Files Post-Confirmation Status Reports ------------------------------------------------------- In separate post-confirmation status reports, dated November 25 and December 8, 2008, Lloyd T. Whitaker, Plan Trustee for Vesta Insurance Group, Inc., disclosed that Vesta made no payments to claims for the months ended October and November 2008. Mr. Whitaker affirmed that all priority and pre-confirmation administrative expense claims against Gaines have been paid in full for both periods. All post-confirmation taxes have been paid by Vesta on a current basis, he added. Ralph Brotherton, Plan Trustee for Florida Select Insurance Agency, Inc.'s Plan of Liquidation, stated in a post-confirmation status report filed with the Court on November 10, 2008, that the Debtor has made an initial distribution of 20% of the allowed unsecured claims for the month ended October 31, 2008. Mr. Brotherton reported that the Debtor made no payments in November 2008. Mr. Brotherton affirmed that all administrative expense payments have been paid in accordance with Florida Select's Plan, except for amounts due to the Debtor's counsel and the Plan Trustee and that the Plan of Liquidation has been substantially consummated. Kevin O'Halloran, Plan Trustee for J. Gordon Gaines, Inc., disclosed that Gaines made no payments to claims for the months ended October and November 2008. Mr. O'Halloran affirmed that all priority and pre-confirmation administrative expense claims against Gaines have been paid in full for both periods. All post- confirmation taxes have been paid by Gaines on a current basis, he added. About Vesta Insurance Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc. (Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offer property insurance in targeted states. Wyatt R. Haskell, Luther S. Pate, UV, and Costa Brava Partnership III, L.P., filed an involuntary chapter 7 petition against the company on July 18, 2006 (Bankr. N.D. Ala. Case No. 06-02517). The case was converted to a voluntary chapter 11 case on Aug. 8, 2006 (Bankr. N.D. Ala. Case No. 06-02517). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represents the Debtor. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the petitioning creditors. In its schedules of assets and liabilities, Vesta listed $14,919,938 in total assets and $214,278,847 in total liabilities. J. Gordon Gaines Inc. is a Vesta Insurance-owned unit that manages the company's numerous insurance subsidiaries and employs the headquarters workers. The company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. N.D. Ala. Case No. 06-02808). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represent the Debtor in its restructuring efforts. In its schedules of assets and liabilities, Gaines listed $19,818,094 in total assets and $16,046,237 in total liabilities. On Aug. 1, 2006, the District Court of Travis County, Texas entered an order appointing the Texas Commissioner of Insurance as Liquidator of Vesta Insurance's Texas-domiciled subsidiaries: Vesta Fire Insurance Corporation; The Shelby Insurance Company; Shelby Casualty Insurance Corporation; Texas Select Lloyds Insurance Company; and Select Insurance Services, Inc. Florida Select Insurance Agency Inc., an affiliate, filed for chapter 11 protection on April 24, 2007 (Bankr. N.D. Ala. Case No. 07-01849). Rufus Dorsey, IV, Esq., at Parker Hudson Rainer & Dobbs LLP, represents Florida Select. The Court confirmed FSIA's plan on March 24, 2008. (Vesta Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) VESTA INSURANCE: Trustee Seeks to Close Gaines' Chapter 11 Case --------------------------------------------------------------- Kevin O'Halloran, in his capacity as Plan Trustee for J. Gordon Gaines, Inc., asks the U.S. Bankruptcy Court for the Northern District of Alabama to close Gaines' Chapter 11 case. In support of his request, Mr. O'Halloran contends that: * he has paid in full all allowed priority tax claims asserted against Gaines; * he has paid in full all allowed priority non-tax claims; * he has completed the process for reviewing all the proof of claims filed against Gaines for general unsecured claims, has objected to certain of the claims, and has resolved the objections either through settlements or by Court order; * he has paid all non-ordinary course administrative claims asserted against Gaines before the Confirmation Date; * he has paid all of the fees and expenses owing to Professional Persons for services rendered before the Effective Date; * he has continued to pay the ordinary course administrative claims asserted against Gaines in accordance with the terms and conditions of agreements with claimants or with applicable law and is current on the administrative claims and on all fees owing to the Bankruptcy Administrator; and * with respect to compensation due the Plan Trustee and any other post-confirmation professionals, he has continued to pay compensation in the ordinary course of business in accordance with the plan. He notes that as of November 25, 2008, he has paid these amounts: Plan Trustee $88,524 PHRD 343,694 Johnston Barton 210,749 Balch and Bingham 77,470 Stichter Riedel 7,030 The Plan Trustee notes that currently, an aggregate of $118,716 in additional unpaid fees and expenses owed by the Gaines' estate to Mr. O'Halloran and to Johnston Barton. He also notes that after entry of a final decree closing the Chapter 11 case, Gaines' estate will incur additional expenses for services rendered and expenses incurred. However, the Plan Trustee believes that the fees and expenses will not adversely impact the Plan Trustee's ability to pay in the ordinary course of managing the Debtor's estate. In addition, the Plan Trustee tells the Court that most of Gaines' assets have been liquidated. The only remaining Gaines assets to be liquidated include, but not limited to: (a) Gaines' right to recover on its proof of claim filed in the bankruptcy case of Florida Select Insurance Agency; (b) Gaines' claim against ITAC Solutions, Inc., which is the subject of a lawsuit pending in the Circuit Court of Jefferson County, Alabama; (c) Gaines' interest as tenant in a property located at 300 Riverhills Business Park, Suite 340, in Birmingham, Alabama; (d) Gaines' interest in certain items of computer equipment and related property interest located in Atlanta, Georgia; (e) any claim by Gaines against Hawaii Insurance & Guaranty Company; (f) any claim by Gaines against Florida Select Insurance Company; and (g) the contingent assets among Gaines, the Texas Receivership Entities, and Vesta Timber Co. LLC. As previously reported, the Court authorized the Plan Trustee to assign certain assets of Gaines to Vesta Fire Insurance Corporation to satisfy Vesta Fire's obligation under the Texas Receivership Settlement Agreement. The Plan Trustee tells the Court that he has already assigned certain D7O claims and claims against former professionals to Vesta Fire pursuant to the Assignment Order. Before the end of the year, he says he hopes to make final distributions totaling $1,072,091 based on allowed general unsecured claims, after which all allowed claims will be paid in full. Additionally, the Plan Trustee intends to pay administrative expenses outstanding and other post-confirmation administrative costs. The Plan Trustee notes that once he has paid all of the allowed Unsecured Claims and any additional administrative expenses, he intends to dissolve Gaines in accordance with Delaware state law, consistent with Section 7.1 of the Plan. The Plan Trustee contends that Gaines' bankruptcy case has been "fully administered" to the extent required for the case to be closed under Section 350(a) of the Bankruptcy Code. About Vesta Insurance Headquartered in Birmingham, Alabama, Vesta Insurance Group, Inc. (Other OTC: VTAI.PK) -- http://www.vesta.com/-- is a holding company for a group of insurance companies that primarily offer property insurance in targeted states. Wyatt R. Haskell, Luther S. Pate, UV, and Costa Brava Partnership III, L.P., filed an involuntary chapter 7 petition against the company on July 18, 2006 (Bankr. N.D. Ala. Case No. 06-02517). The case was converted to a voluntary chapter 11 case on Aug. 8, 2006 (Bankr. N.D. Ala. Case No. 06-02517). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represents the Debtor. R. Scott Williams, Esq., at Haskell Slaughter Young & Rediker, LLC, represents the petitioning creditors. In its schedules of assets and liabilities, Vesta listed $14,919,938 in total assets and $214,278,847 in total liabilities. J. Gordon Gaines Inc. is a Vesta Insurance-owned unit that manages the company's numerous insurance subsidiaries and employs the headquarters workers. The company filed for chapter 11 protection on Aug. 7, 2006 (Bankr. N.D. Ala. Case No. 06-02808). Eric W. Anderson, Esq., at Parker Hudson Rainer & Dobbs, LLP, represent the Debtor in its restructuring efforts. In its schedules of assets and liabilities, Gaines listed $19,818,094 in total assets and $16,046,237 in total liabilities. On Aug. 1, 2006, the District Court of Travis County, Texas entered an order appointing the Texas Commissioner of Insurance as Liquidator of Vesta Insurance's Texas-domiciled subsidiaries: Vesta Fire Insurance Corporation; The Shelby Insurance Company; Shelby Casualty Insurance Corporation; Texas Select Lloyds Insurance Company; and Select Insurance Services, Inc. Florida Select Insurance Agency Inc., an affiliate, filed for chapter 11 protection on April 24, 2007 (Bankr. N.D. Ala. Case No. 07-01849). Rufus Dorsey, IV, Esq., at Parker Hudson Rainer & Dobbs LLP, represents Florida Select. The Court confirmed FSIA's plan on March 24, 2008. (Vesta Bankruptcy News, Issue No. 42; Bankruptcy Creditors' Service, Inc., http://bankrupt.com/newsstand/or 215/945-7000) VILLAGE HOMES: Has Authority to Use Cash & Sell Homes ----------------------------------------------------- Bloomberg News reports that Homebuilder Village Homes of Colorado Inc. has authority until March 9 to use cash and sell homes so long as the lenders don't object. The company disclosed $138 million in debt in its bankruptcy petition. According to Bloomberg's Bill Rochelle, the lender with the largest secured claim is an affiliate of Guaranty Financial Group Inc. owed $86 million. GMAC LLC and its subsidiary Residential Capital LLC are owed $36.1 million. Headquartered in Greenwood Village, Colorado, Village Homes of Colorado Inc. develops and builds residential communities. The Debtor filed for bankruptcy on November 6, 2008 (Bankr. D. Colo. Case No. 08-27714). The Hon. A. Bruce Campbell presides over the case. Garry R. Appel, Esq., at Appel Lucas, in Denver, Colorado, acts as the Debtor's bankruptcy counsel. When it filed for bankruptcy, the Debtor reported $103,898,087 in total assets, and $138,414,003 in total debts. WELLMAN INC: Parties Object to Confirmation of Restructuring Plan ----------------------------------------------------------------- Three parties have filed objections to Wellman Inc. and its affiliates' Joint Plan of Reorganization, as amended. A. Dow Chemical The Dow Chemical Company tells the U.S. Bankruptcy Court for the Southern District of New York that it engaged in negotiations with the Debtors as to the resolution of its objections to the confirmation of the Debtors' Third Amended Joint Plan of Reorganization. Given the ongoing negotiations, Dow Chemical filed a limited objection to preserve its rights. Scott P. Shectman, Esq., at Dilworth Paxson LLP, in Philadelphia, Pennsylvania, relates that Dow Chemical is generally concerned about the Debtors' ability to pay its claim pursuant to Section 503(b)(9) of the Bankruptcy Code. In addition, Dow Chemical is also concerned if the Debtors have the ability to meet their burden of proof. Dow Chemical says it has an ongoing sales relationship with the Debtors and thus, objects to the granting and scope of proposed releases contained in Article VIII of the Plan. Dow Chemical further objects to: -- the bringing of any causes of action which are not specifically disclosed and any provision of the Plan that can be construed to limit Dow Chemical's ability to assert a defense or counterclaim; -- the "waivability" provisions under the Plan without notice to potentially affected creditors; -- the Plan as it can be construed that Dow Chemical is waiving and giving up any right to assert its setoff on recoupment rights; and -- any provisions of the Plan that can be construed as prohibiting the payment of Dow Chemical's Section 503(b)(9) Claim on the effective date of the Plan. B. MEGlobal Americas MEGlobal Americas, Inc., tells the Court that it is currently engaged in significant negotiations with the Debtors in connection with resolving multiple issues, including, but not limited to: -- the assumption of an existing supply agreement for the sale of a product known as EG or EGPG; -- the creation of a long-term supply agreement for another separate product; -- the reconciliation of prepetition monies due to MEGlobal and MEGlobal's setoff and recoupment rights as to credits due from MEGlobal to Wellman; and -- the priority, treatment and satisfaction of MEGlobal's claims. Given the ongoing negotiations, MEGlobal seeks to preserve its rights with respect to the Debtors' Third Amended Joint Plan of Reorganization. C. Eastman Ross S. Barr, Esq., at Jones Day, in New York, relates that before the objection deadline, Eastman Chemical Company contacted the Debtors regarding certain of its concerns with respect to the Debtors' Third Amended Joint Plan of Reorganization. As a result of the discussion, the Debtors agreed to make certain modifications on any order confirming the Plan to resolve Eastman's concerns. Specifically, the Debtors agreed to the inclusion of this language: "Nothing in the Plan or this Confirmation Order shall in any way limit or impact (a) any setoff, recoupment or similar rights that Eastman may have relating to the Litigation and any proof of Claim filed in these chapter 11 cases, (b) the full and final adjudication of the Litigation in the Delaware District Court, including Eastman's assertion, prosecution and/or litigation (including the conducting of discovery) of its counterclaims and defenses asserted in the Litigation, and the liquidation of all claims asserted by the parties in the Litigation, with any Claims of Eastman against the Debtors arising out of the Litigation receiving the same treatment accorded to similarly situated Claims under the Plan or (c) any claims or causes of action that Eastman may have against any Released Party, other than the Debtors, (i) relating to the Litigation or (ii) unrelated to the Debtors." Eastman Chemical is a defendant and counterclaimant in a patent infringement action currently pending in the United States District Court for the District of Delaware. Because the documents reflecting the Plan Changes likely will not be complete until on or shortly before the date of the Confirmation Hearing, Eastman Chemical reserves its rights with respect to the confirmation of the Plan. To the extent the changes are not reflected in the relevant documents, Eastman Chemical reserves its right to amend or supplement its limited objection and to object to the Plan on any and all grounds. Terms of Wellman's Plan As reported by the Troubled Company Reporter in November, the Bankruptcy Court has approved Wellman's Amended Disclosure Statement and authorized the company to begin soliciting votes on its plan of reorganization. The Plan contemplates the: -- The debt of the first and second lien holders will be converted into equity of the reorganized company -- "Reorganized Wellman". The first lien holders will receive 70%, and the second lien holders will receive 30% of the common stock of Reorganized Wellman on the Plan's effective date, subject to dilution by the conversion of the newly issued convertible notes. -- The company will receive $90 million in cash in exchange for $120 million of convertible notes issued through a rights offering, which will be offered to the first and second lien holders. These notes can be converted into 60% of the common stock of Reorganized Wellman. The $90 million will be used to repay amounts borrowed under its Debtor in Possession Credit Agreement and pay certain deferred financing fees, administrative expenses, priority claims, cure payments and professional fees. -- The first lien holders will receive the proceeds from the sale of the property, plant, and equipment associated with the company's Palmetto facility. -- The second lien holders will receive approximately 80% of the proceeds, if any, of a litigation trust and the general unsecured creditors will receive the remainder. The company has obtained an amendment of its DIP Facility, which provides that the company must achieve the following milestones in order to remain in compliance with the DIP Facility: -- Receive an acceptable backstop commitment for the rights offering on or before Nov. 25, 2008; -- Obtain an order confirming the Plan by Dec. 16, 2008; and -- Emerge from bankruptcy prior to Dec. 31, 2008. About Wellman Inc. Headquartered in Fort Mill, South Carolina, Wellman Inc. ([OTC]: WMANQ.OB) -- http://www.wellmaninc.com/-- manufactures and markets packaging and engineering resins used in food and beverage packaging, apparel, home furnishings and automobiles. They manufacture resins and polyester staple fiber a three major production facilities. The company and its debtor-affiliates filed for Chapter 11 protection on Feb. 22, 2008 (Bankr. S.D. N.Y. Case No. 08-10595). Jonathan S. Henes, Esq., at Kirkland & Ellis, LLP, in New York City, represents the Debtors. Lazard Freres & Co., LLC, acts as the Debtors' financial advisors and investment bankers. Conway, Del Genio, Gries & Co., LLC, was also retained as the Debtors' chief restructuring advisor. The United States Trustee for Region 2 has appointed seven members to the Official Committee of Unsecured Creditors. Mark R. Somerstein, Esq., at Ropes & Gray LLP, serves as the Committee's bankruptcy counsel. FTI Consulting, Inc., acts as the panel's financial advisors. Wellman Inc., in its bankruptcy petition, listed total assets of $124,277,177 and total liabilities of $600,084,885, as of Dec. 31, 2007, on a stand-alone basis. Debtor-affiliate ALG, Inc., listed assets between $500 million and $1 billion on a stand-alone basis at the time of the bankruptcy filing. Debtor-affiliates Fiber Industries Inc., Prince Inc., and Wellman of Mississippi Inc., listed assets between $100 million and $500 million at the time of their bankruptcy filings. On a consolidated basis, Wellman Inc., and its debtor-affiliates listed $512,400,000 in total assets and $730,500,000 in liabilities as of June 30, 2008. Wellman filed a restructuring plan before the Bankruptcy Court on June 25, 2008. (Wellman Bankruptcy News; Bankruptcy Creditors' Service Inc., http://bankrupt.com/newsstand/or 215/945-7000). WHITING PETROLEUM: S&P Keeps BB- Sub. Debt Rating; Outlook Stable ----------------------------------------------------------------- Standard & Poor's Ratings Services said that, following an industry review of oil and gas exploration and production companies, it revised the outlook to stable from positive on a number of speculative-grade companies while affirming the ratings. The review was prompted by S&P's recent revision of its oil and gas pricing assumptions in light of the rapid decline in hydrocarbon prices and S&P's expectation that lower prices will prevail for the near to medium term. S&P revised the outlook on Forest Oil Corp. (BB-) to stable from positive because S&P expects worsening credit metrics. At S&P's 2009 pricing assumptions, S&P expects debt to EBITDA to be roughly 3x, which well exceeds S&P's published upgrade trigger of 2x. In addition to the lower pricing assumptions, Forest's debt is higher than S&P previously expected because the company has not been able to consummate anticipated asset sales. Liquidity should remain adequate in 2009. S&P expects Forest to lower its capital budget from the 2008 level to be in line with internally generated cash flows. S&P revised the outlook on Whiting Petroleum Corp. (BB-) to stable from positive. Although the company has reported significant production growth throughout 2008, primarily in the Bakken oil formation in the northern U.S.), positive rating momentum has stalled because of the lower price environment. Furthermore, Whiting is vulnerable to further price declines because of its minimal hedge position in 2009. S&P does highlight, though, that the company's liquidity position of about $400 million as of Sept. 30, 2008, and its significant covenant cushion are adequate for the rating. On Clayton Williams Energy Inc. (B) S&P revised the outlook to stable from positive because of weaker credit measures, in light of S&P's revised crude oil and natural gas price assumptions. Although near-term liquidity remains adequate, the outlook revision reflects S&P's expectation that Clayton Williams will not be able to sustain its recent financial performance in the near term. S&P also expect Clayton's operating cash flows to weaken, given the company's "unhedged" position in 2009 and a relatively high cost structure. The revision of the outlook on Venoco Inc. (B) to stable from positive stems from falling commodity prices. This decline reduces S&P's confidence that credit measures will improve materially in the near term. The company is selling or monetizing (through a volumetric production payment) its interest in the Hastings complex to Denbury Resources Inc. (BB/Stable/--), which will likely result in debt repayment and increase availability under the revolving credit facility. However, the lower price environment will probably reduce the proceeds. Ratings List Ratings Affirmed, Outlook Revised Clayton Williams Energy Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sr unsecd B+ B+ Recovery 2 2 Forest Oil Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sr unsecd B+ B+ Recovery 5 5 Venoco Inc. To From -- ---- Corporate credit rating B/Stable/-- B/Positive/-- Sub debt B B Recovery 3 3 Whiting Petroleum Corp. To From -- ---- Corporate credit rating BB-/Stable/-- BB-/Positive/-- Sub debt BB- BB- Recovery 3 3 YM BIOSCIENCES: Auditor Raises Going Concern Doubt -------------------------------------------------- KPMG LLP, Chartered Accountants, in Toronto, Canada, had expressed substantial doubt about the company's ability to continue as a going concern after it audited the company's financial statements for the three-year period ended June 30, 2008. "The company has no net earnings, minimal revenue and negative operating cash flows that raise substantial doubt about its ability to continue as a going concern," KPMG said in a letter to the Board dated September 15, 2008. In its Annual Report for the year ended June 30, 2008, the company disclosed that since inception, it has concentrated on licensing, acquisition and product development. "It has had no net earnings, minimal revenue and negative operating cash flows, and has financed its activities through the issuance of equity. The company's ability to continue as a going concern is dependent on obtaining additional investment capital and the achievement of profitable operations. There can be no assurance that the company will be successful in increasing revenue or raising additional investment capital to generate sufficient cash flows to continue as a going concern." As of June 30, 2008, the company's balance sheet showed total assets of $63,073,239, total liabilities of $6,645,952, total deferred revenue of $4,414,256, and total shareholders' equity of $52,013,031. For the years ended June 30, 2006, 2007, and 2008, the company posted net losses of $86,566,501, $118,296,741 and $133,182,485. A full-text copy of the company's Annual Report is available for free at: http://www.sec.gov/Archives/edgar/data/1178347/000114420408053912/v126907_20f.htm YM Biosciences Inc. is developing certain therapeutic products for patients with cancer and an inhalation delivered fentanyl product to treat acute and breakthrough pain, including cancer pain. It was incorporated on August 17, 1994 under the laws of the Province of Ontario and was continued under the laws of the Province of Nova Scotia on December 11, 2001. It has entered into licensing agreements with certain biotechnology, pharmaceutical and medical institutes or has acquired technology originated in those institutes. During fiscal 2006, the company acquired Eximias Pharmaceutical Corporation of Berwyn, Pennsylvania, a privately held pharmaceutical company engaged in the acquisition, development and commercialization of products for the treatment of cancer and cancer-related disorders. During fiscal 2005, the Company acquired Delex Therapeutics Inc. ZOO HF: Fitch Retains Junk Ratings on EUR12.5 Mil. Class D Notes ---------------------------------------------------------------- Fitch Ratings has revised the Rating Watch on three classes of Zoo HF 3 Plc. to Negative from Evolving. -- EUR94,500,000 class A remains at 'A' and Rating Watch revised to Negative from Evolving; -- EUR8,000,000 class B remains at 'BBB' and Rating Watch revised to Negative from Evolving; -- EUR6,500,000 class C remains at 'BB' and Rating Watch revised to Negative from Evolving; -- EUR12,500,000 class D remains at 'CCC'; -- EUR5,500,000 class E remains at 'CCC'. An anticipated restructuring is no longer expected to occur. As such, the transaction will go into a full redemption. The preliminary results for the end of November are still within Fitch's expectations of a 10% initial loss applied in its cash flow analysis. In addition, Fitch also reviewed the transaction under a stressed redemption scenario which applies a peak two month rolling loss based off of the Credit Suisse Tremont Hedge Fund Index along with additional scaled stresses to the portfolio. Class A, B and C notes are placed on Rating Watch Negative given the current market environment that has negatively affected the hedge fund sector. Fitch may take additional action if Zoo experiences losses that exceed Fitch's expectations. * Fitch Says U.S. CMBS Loan Extensions Won't Trigger Rating Cuts ---------------------------------------------------------------- Most fixed-rate U.S. CMBS loans that mature within the next six months are likely to be extended, although this event would not necessarily trigger rating downgrades, according to Fitch Ratings. Approximately 1,100 fixed-rate loans totaling $5.7 billion in Fitch's portfolio, need to refinance before June 30, 2009. This exposure is in 111 deals with an unpaid balance of $77 billion out of the universe of 433 deals, totaling $510 billion. Fitch expects the majority of losses would be absorbed by the 'CCC' and below classes, any negative rating actions will likely be to below investment grade classes. Last quarter, Fitch observed an increase in performing matured loans, a trend which Fitch expects to continue. Loans are likely to transfer to special servicing before maturity due to the continued lack of available capital to refinance. Most of these loans would have refinanced a year or even six months ago given their high coupons, amortization and generally high debt service coverage ratios. Through the third quarter of this year, most borrowers were able to refinance maturing loans, although some required short term extensions (generally 60 days) from master servicers in order to allow more time to close new loan commitments. While some refinancing came from larger banks and insurance companies, to a greater extent it was provided by smaller regional banks. Because liquidity is now non-existent, master servicers are transferring more loans with upcoming maturities to special servicing. Special servicers have the flexibility to work out, modify or extend loans up to a year at a time, whereas a master servicer can only offer a short term extension. Fitch expects special servicers will extend many loans until liquidity returns to the market, rather than foreclosing on properties in a stalled market. 'While it is difficult to say when liquidity will return to the market, lending will come back slowly and to the lower leveraged, strongest performing properties first,' said Susan Merrick, Managing Director and head of Fitch's U.S. CMBS group. While many of the loans with modified maturity dates will eventually secure financing, loans in troubled markets or those susceptible to declining consumer spending such as retail and hotel properties, may see their cash flows decline and have a harder time securing financing even when liquidity does return. Fitch will closely monitor the performance of these modified loans. While modified loans are subject to special servicing fees, Fitch expects servicers to pass these costs on to borrowers as a condition of their extensions. Those fees reimbursed would contribute to interest shortfalls to the deals. * Moody's Sees Bankruptcy Risk Among Derivative Product Companies ----------------------------------------------------------------- Moody's is reviewing several issues regarding the operations of derivative product companies, including the risk of voluntary bankruptcy and, for a subset of DPCs, the role of continuation managers. DPCs are special purpose operating companies typically established and sponsored by investment banks to transact in derivative products such as interest rate swaps. Their Aaa ratings are based on factors such as bankruptcy remoteness from their sponsor, dynamic capital and collateral requirements, insulation from market risk via mirror trades with a sponsor- affiliated entity and adherence to a set of operating guidelines that, among other things, restricts the types of products the DPC may transact in. In light of the October 5, 2008, bankruptcy filings by Lehman Brothers Derivative Products Inc. and Lehman Brothers Financial Products Inc., two DPCs sponsored by Lehman Brothers, Moody's highlights the risk that well-capitalized DPCs which otherwise merit their Aaa counterparty rating may file for voluntary bankruptcy. As a result of LBDP's and LBFP's bankruptcy filings and persisting uncertainty over the timing of their payments to their counterparties, Moody's downgraded the counterparty ratings of LBDP and LBFP from Aaa to Baa3 with direction uncertain on October 6, 2008, and further to B1 on review for downgrade on October 10, 2008. LBDP's Aaa counterparty rating was initially placed on review for downgrade on September 16, 2008 due to operational risk in administering LBDP's termination as a derivative products company. The bankruptcy filing of Lehman Brothers Holdings Inc. had caused a trigger event for LBDP, which as a termination vehicle required LBDP to unwind its portfolio. Moody's is engaged in active dialogue with DPCs to assess their susceptibility to voluntary bankruptcy and possible mitigants to that risk. For DPCs whose operating guidelines specify the activation of a contingent manager under certain circumstances, Moody's is also discussing the role of such a contingent manager. With respect to the risk of voluntary bankruptcy, issues of concern to Moody's include mechanisms to preserve the independence of the board of directors, procedural requirements for filing voluntary bankruptcy, safeguards against the improper removal and replacement of independent directors, and transparency and timely communication of bankruptcy-related board actions to interested parties, including counterparties. Moody's is also interested in whether counterparties have an adequate opportunity to contest an invalidly filed application for voluntary bankruptcy. In Moody's view, voluntary bankruptcy poses a significant risk that, at the very least, counterparties will not receive payments due to them on a timely basis. In some circumstances, the ability of a DPC to ultimately meet its obligations in full may be compromised by a bankruptcy filing. Although DPCs have existing features that protect their bankruptcy remoteness, the bankruptcy filings of the Lehman DPCs have called into question the sufficiency of those measures. As a result, Moody's will be reviewing the actions undertaken by each DPC to address the risk of voluntary bankruptcy and analyzing their adequacy. Moody's will be issuing a publication on both the potential mitigants to the risk of voluntary bankruptcy and findings with respect to continuation managers, followed by an invitation for comments from market participants. * S&P Puts Junk Ratings on 8 Tranches From Seven CDO Deals ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 15 tranches from seven U.S. cash flow and hybrid collateralized debt obligation transactions. S&P removed seven of the lowered ratings from CreditWatch with negative implications. The ratings on six of the downgraded tranches are on CreditWatch with negative implications, indicating a significant likelihood of further downgrades. The CreditWatch placements primarily affect transactions for which a significant portion of the collateral assets currently have ratings on CreditWatch with negative implications or have significant exposure to assets rated in the 'CCC' category. The 15 downgraded U.S. cash flow and hybrid tranches have a total issuance amount of $2.129 billion. Four of the seven affected transactions are mezzanine structured finance CDOs of asset-backed securities, which are collateralized in large part by mezzanine tranches of residential mortgage-backed securities and other SF securities. Two of the seven are high-grade SF CDOs of ABS that were collateralized at origination primarily by 'AAA' through 'A' rated tranches of RMBS and other SF securities. The other transaction is a CDO of CDOs that was collateralized at origination primarily by notes from other CDOs, as well as by tranches from RMBS and other SF transactions. The CDO downgrades reflect a number of factors, including credit deterioration and recent negative rating actions on U.S. subprime RMBS. In addition, S&P reviewed the ratings assigned to Klio III Funding Ltd. and left the ratings on this transaction at their current levels based on the current credit support available to support the tranches. To date, including the CDO tranches listed below and including actions on both publicly and confidentially rated tranches, S&P has lowered its ratings on 4,084 tranches from 914 U.S. cash flow, hybrid, and synthetic CDO transactions as a result of stress in the U.S. residential mortgage market and credit deterioration of U.S. RMBS. In addition, 962 ratings from 431 transactions are currently on CreditWatch with negative implications for the same reasons. In all, S&P has downgraded $486.274 billion of CDO issuance. Additionally, S&P's ratings on $9.251 billion of securities have not been lowered but are currently on CreditWatch with negative implications, indicating a high likelihood of future downgrades. S&P will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Camber 5 Ltd 1 CC BBB-/Watch Neg Camber 5 Ltd A-2 CC BB-/Watch Neg Cascade Funding CDO I A-1 AA/Watch Neg AAA/Watch Neg Cascade Funding CDO I A-2 CC CCC- C-BASS CBO XIII Ltd B AA- AA C-BASS CBO XIII Ltd C A-/Watch Neg A/Watch Neg C-BASS CBO XIII Ltd D BB/Watch Neg BBB/Watch Neg Crystal Cove CDO, Ltd. A1 B-/Watch Neg BBB+/Watch Neg Crystal Cove CDO, Ltd. A2 CC B-/Watch Neg Halcyon Securitized Products A-1 CC BBB-/Watch Neg Investors ABS CDO I Ltd. Halcyon Securitized Products A-2 CC B-/Watch Neg Investors ABS CDO I Ltd. Halcyon Securitized Products B CC CCC/Watch Neg Investors ABS CDO I Ltd. McKinley Funding Ltd ABCP BB/B/Watch Neg A+/A-1+/Watch Neg McKinley Funding Ltd A-1 B-/Watch Neg BBB-/Watch Neg Point Pleasant Funding 2007-1 S CCC- BB+/Watch Neg A- Other Ratings Reviewed Transaction Class Rating ----------- ----- ------ Camber 5 Ltd A-3 CC Camber 5 Ltd B CC Camber 5 Ltd C CC C-BASS CBO XIII Ltd A AAA Crystal Cove CDO, Ltd. B CC Crystal Cove CDO, Ltd. C1 CC Crystal Cove CDO, Ltd. C2 CC Halcyon Securitized Products C CC Investors ABS CDO I Ltd. Halcyon Securitized Products D CC Investors ABS CDO I Ltd. Halcyon Securitized Products E CC Investors ABS CDO I Ltd. Klio III Funding Ltd ABCP BBB/A-2/Watch Neg Klio III Funding Ltd A-1 B+/Watch Neg Klio III Funding Ltd A-2 CCC-/Watch Neg Klio III Funding Ltd B CC Klio III Funding Ltd C CC Klio III Funding Ltd Pref Shrs CC McKinley Funding Ltd A-2 CC McKinley Funding Ltd A-3 CC McKinley Funding Ltd B CC McKinley Funding Ltd C CC Point Pleasant Funding 2007-1 UnfdSrExpo CCsrp Point Pleasant Funding 2007-1 A-1 CC Point Pleasant Funding 2007-1 A-2 CC Point Pleasant Funding 2007-1 B CC Point Pleasant Funding 2007-1 C CC Point Pleasant Funding 2007-1 D CC * Large Companies with Insolvent Balance Sheets ----------------------------------------------- Total Share- Total Holders Working Assets Equity Capital Company Ticker ($MM) ($MM) ($MM) ------- ------ ------ ------- ------- ABSOLUTE SOFTWRE ABT CN 107 (3) 31 APP PHARMACEUTIC APPX US 1,105 (42) 260 ARBITRON INC ARB US 162 (9) (39) BARE ESCENTUALS BARE US 272 (25) 125 BLOUNT INTL BLT US 485 (20) 119 CABLEVISION SYS CVC US 9,717 (4,966) (1,583) CENTENNIAL COMM CYCL US 1,394 (1,026) 86 CHENIERE ENERGY LNG US 3,049 (266) 423 CHENIERE ENERGY CQP US 2,021 (312) 179 CHOICE HOTELS CHH US 350 (91) (8) CLOROX CO CLX US 4,587 (364) (396) CV THERAPEUTICS CVTX US 392 (226) 286 DELTEK INC PROJ US 188 (62) 34 DISH NETWORK-A DISH US 7,177 (2,129) (1,318) DOMINO'S PIZZA DPZ US 441 (1,437) 84 DUN & BRADSTREET DNB US 1,642 (554) (206) DYAX CORP DYAX US 91 (28) 33 ENERGY SAV INCOM SIF-U CN 464 (263) (92) EXELIXIS INC EXEL US 255 (23) (1) EXTENDICARE REAL EXE-U CN 1,621 (31) 125 FERRELLGAS-LP FGP US 1,510 (12) (114) GARTNER INC IT US 1,115 (15) (253) GENERAL MOTORS GM US 110,425 (58,994) (18,461) GENERAL MOTORS C GMB BB 110,425 (58,994) (18,461) HEALTHSOUTH CORP HLS US 1,980 (874) (218) IMAX CORP IMX CN 238 (91) 41 INCYTE CORP INCY US 265 (177) 216 INTERMUNE INC ITMN US 206 (92) 134 KNOLOGY INC KNOL US 647 (44) 13 LINEAR TECH CORP LLTC US 1,665 (378) 1,109 MOODY'S CORP MCO US 1,694 (894) (331) NATIONAL CINEMED NCMI US 569 (476) 86 NAVISTAR INTL NAV US 11,557 (228) 1,501 NPS PHARM INC NPSP US 202 (208) 90 OCH-ZIFF CAPIT-A OZM US 2,224 (173) - OSIRIS THERAPEUT OSIR US 29 (8) (14) OVERSTOCK.COM OSTK US 145 (4) 33 REGAL ENTERTAI-A RGC US 2,557 (224) (112) REVLON INC-A REV US 877 (999) 8 ROTHMANS INC ROC CN 545 (213) 102 SALLY BEAUTY HOL SBH US 1,527 (697) 367 SONIC CORP SONC US 836 (64) (13) STEREOTAXIS INC STXS US 55 (5) 3 SUCCESSFACTORS I SFSF US 168 (3) 4 SUN COMMUNITIES SUI US 1,222 (28) - SYNTA PHARMACEUT SNTA US 91 (35) 58 TAUBMAN CENTERS TCO US 3,182 (20) - TEAL EXPLORATION TEL SJ 56 (22) (62) THERAVANCE THRX US 255 (125) 184 UAL CORP UAUA US 20,731 (1,282) (1,583) UST INC UST US 1,402 (326) 237 WEIGHT WATCHERS WTW US 1,110 (901) (270) WESTERN UNION WU US 5,504 (90) 319 WR GRACE & CO GRA US 3,754 (179) 970 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Luke Caballos, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2008. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***